TITLE:
Commodity Price Stabilization under Unattainable Stocks
AUTHORS:
Andrew Schmitz
KEYWORDS:
Commodity Storage, Price Stabilization, Price Uncertainty
JOURNAL NAME:
Theoretical Economics Letters,
Vol.8 No.5,
April
8,
2018
ABSTRACT: Commodity price stabilization continues to be a
subject of keen interest to policy makers. The general conclusion within the
context of welfare economics is that price stabilization brought about through
stockholding activities leads to a net welfare improvement to society even
though there are gainers and losers from price stabilization policies. Under
the standard price expectation formulation used, storage does not result in
complete price stability, but in price fluctuations within a positive price
band. However, it does generate price stability under an alternative price
expectation framework. Under the standard price expectation formulation, the
gains from stability are positive, but much less than under an alternative
price expectation specification.