On the relevance of world agricultural prices

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On the relevance of world agricultural prices, Volume 1

Author:	Mundlak, Yair; Larson, Donald F.;	Collection Title:	Policy, Research, and External Affairs working papers ; no. WPS 383
Date Stored:	1990/03/01	Document Date:	1990/03/31
Document Type:	Policy Research Working Paper	Language:	English
Major Sector:	Agriculture, fishing, and forestry	Report Number:	WPS383
Sub Sectors:	Other Agriculture	SubTopics:	Environmental Economics & Policies; Pharmaceuticals & Pharmacoeconomics; Economic Theory & Research; Markets and Market Access; Access to Markets
Volume No:	1

Summary: This report is part of an attempt to model the global markets for primary commodities and to use these models for forecasting purposes as well as for policy analysis. In a free market, domestic prices on agricultural products could be expected to vary with world prices. But intervention is so common with agricultural products that prices vary between countries and gaps exist between world and domestic prices. International prices are often used as a proxy for domestic prices. But it is often claimed that world prices are irrelevant to agricultural development in countries that intervene in agricultural pricing. This paper examined the appropriateness of this substitution in measuring, for example, the agricultural supply response to price changes - particularly in the long run. It concluded that on the whole, world prices are indeed relevant. The results - for 18 countries and 17 commodities - are surprisingly robust, and invariant to both data sources and time/commodity pooling.


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