Skip to main content
Article thumbnail
Location of Repository

The Impact of Domestic and International Commodity Price Volatility on Agricultural Income Instability: Ghana, Vietnam and Peru

By George Rapsomanikis and Alexander Sarris

Abstract

The extent to which commodity price volatility affects the income of producing households and their vulnerability to poverty and food insecurity depends on household diversification patterns and the degree of their exposure to markets. This article focuses on estimating agricultural income uncertainties for a number of different household types in Ghana, Vietnam and Peru. We develop explicit formulae for household income variance, and we combine information from household datasets and commodity price time-series in order to estimate the income uncertainty that emanates from price and production volatility under different scenarios of exposure to international and domestic markets shocks. Our results indicate that market and nonmarket uncertainties significantly affect the variability of agricultural income of households in these countries, and especially households that are specialized in a few commodities. However, it turns out that, under current policies, almost all of their income variability is due to domestic factors, with international prices not contributing much, at least in the short run. Wider exposure to international markets would increase the income variability of producers who have been subjected to domestic market stabilization policies in Ghana and Vietnam, while it would decrease it in the case of Peru.commodity prices, risk, households

OAI identifier:

Suggested articles

Citations

  1. (2001). Agriculture Organization (FAO)
  2. (1999). Are the Poor less Well Insured? Evidence on Vulnerability to Income Risk in Rural China’.
  3. (2003). Asset Smoothing, Consumption Smoothing and the Reproduction of Inequality under Risk and Subsistence Constraints’.
  4. (2000). Commodity Price Uncertainty in Developing Countries’.
  5. (1995). Consumption Insurance: An Evaluation of Risk-bearing Systems in Low-income Economies’.
  6. (1993). Credit Market Constraints, Consumption Smoothing, and the Accumulation of Durable Production Assets in Low-income Countries: Investment in Bullocks in India’.
  7. (1998). Drought and Saving in West-Africa: are Livestock a Buffer Stock?’.
  8. (1997). Environment, Technology, and the Social Articulation of Risk
  9. (2000). Food Security and Trade Negotiations in the World Trade Organization: A Cluster Analysis of Country Groups’.
  10. (1995). Income Smoothing and Consumption Smoothing’.
  11. (1993). Introduction to Multiple Time Series Analysis.
  12. (1969). Investigating Causal Relationships by Econometric Models and Cross Spectral Methods’.
  13. (2005). Monetary Fund
  14. (2004). Risk, Insurance and Poverty’,
  15. (2003). Rural Poverty, Risk and Development.
  16. (1991). Savings and Liquidity Constraints’.
  17. (1988). Some Recent Developments in the Concept of Causality’.
  18. (2002). The Demand for Commodity Insurance by Developing Country Agricultural Producers: Theory and Application to Cocoa
  19. (1981). The Theory of Commodity Price Stabilization: Study in the Economics of Risk.
  20. (1994). Time Series Analysis.
  21. (2004). Trade Exposure and Income Volatility in Cash-crop Exporting Developing Countries’.

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.