Agricultural Markets and Risks : Management of the Latter, Not the Former
The authors review the historical relationship between the work of applied economists, and policymakers, and the institutions that came to characterize the commodity, and risk markets of the 1980s. These institutions were a response to the harmful...
| Main Authors: | , , |
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2013
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2002/02/1719824/agricultural-markets-risks-management-latter-not-former http://hdl.handle.net/10986/15608 |
| Summary: | The authors review the historical
relationship between the work of applied economists, and
policymakers, and the institutions that came to characterize
the commodity, and risk markets of the 1980s. These
institutions were a response to the harmful consequences of
commodity market volatility, and declining terms of trade.
But the chosen policies, and instruments relied on market
interventions, to directly affect prices, or the
distribution of prices in domestic, and international
markets. For practical, and more fundamental reasons, this
approach failed. The authors next discuss how a growing body
of work, contributed to a change in thinking that moved
policy away from stabilization goals, toward policies that
emphasized the management of risks. They distinguish between
the macroeconomic effects of volatile commodity markets, and
the consequences for businesses, and households. The authors
argue that both sets of problems remain important
development issues, but that appropriate policy instruments
are largely separate. Nonetheless, because governments,
households, and firms must all respond to a wide range of
sources of risk, they emphasize the role for an integrated
policy by government. Increasingly, alternative approaches
have come to rely on market-based instruments. Such
approaches accept the market view of relative prices as
immutable, but address directly the negative consequences of
volatility. As traditional risk markets (such as futures and
insurance markets) expand, and new parametric markets
emerge, the practicality of applying market-based
instruments to traditional risk, and development problems
increases. The authors show the change in approaches to
risk, and the reliance on old, and new market instruments,
with new, and sometimes experimental programs, with special
emphasis on programs at the World Bank. |
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