The Effects of Collective Devaluation on Commodity Prices and Exports

Because measures to stimulate export production are often part of economic adjustment programs, the possible repercussions in particular commodity markets of collective actions by producers to encourage exports merit study. A simplified model is developed and used to simulate supply-side policies in the world market for a primary commodity to explore the policies' effects on prices, volumes, and export receipts over a decade. Although the potential for adverse effects exists, this finding is not an argument against devaluation, since the beneficial effects of such a policy in other areas might outweigh the short-run effect on major commodity exports.

The 1984-86 Commodity Recession: Analysis of Underlying Causes

The large and widespread decline in non-oil primary commodity prices during 1984-86 is shown to be fundamentally different from the declines in the four previous cycles since 1970, which had been caused largely by weak demand. Rising supplies of food and the lagged effects of increased production capacity of industrial raw materials were major factors depressing primary commodity markets in the 1980s, particularly in 1984-86. The econometric results also suggest that economic growth in the industrial countries must, on average, be over 3 percent a year to contribute positively to commodity prices by offsetting negative longer-term structural changes.