Market Reforms and Commodity Price Volatility: The Case of East African Coffee Market

摘要

The reforms of primary commodity markets were at the centre of wider structural adjust-merit policies implemented in commodity-dependent countries that were facing balance of payment and mounting external debt problems in 1970s and 1980s. The reforms, which commenced under the aegis of the World Bank and IMF in the 1980s, principally targeted agricultural sectors of developing countries because of heavy dependence of those economies on primary agricultural products for foreign exchange earnings. In general, commodity market reforms emphasised liberalisation policies aimed at transforming government-controlled commodity markets into more liberalised, market-driven structure aimed at increasing efficiency and boosting economic growth. Theoretically, liberalised markets are expected to create competition among commodity traders in both domestic and international markets and increase commodity prices and price volatility (Kruger et al., 1998; Hill, 2006); as well as increase market size (Voituriez, 2001). Despite having similar goals, different approaches have been used to implement commodity markets reforms across countries (Akiyama, 2001), leading to different outcomes (see e.g. Han et al., 1990; Cuddington, 1992; Deaton and Laroque, 1992; Reinhart and Wickham, 1994; Crain and Lee, 1996; Shively, 1996; Larson et al., 1998; Cashin et al., 2000; Chaudhuri, 2001; Yang et al., 2001; Cashin and McDermott, 2002; Swaray, 2007). Specifically, the literature provides contradicting results on the impact reforms have had on commodity producer price volatility: evidences varying from increase, decrease and no impact.