Origin of Production Shocks, Agricultural Price Spikes and Trade Policy

Wenshou Yan and Guoqu Deng

Manchester School, 2019, vol. 87, issue 1, 81-102

Abstract: This paper incorporates exogenous production shocks into short‐run policy making process, and altruism is introduced into government utility functions under cooperative policy making scenario. The results reveal that the noisy signal from production shocks and government's self‐interested behaviors consist of the main barriers to make cooperative trade negotiations between agricultural importers and exporters. Finally, the project puts forward that domestic public storage policy is a feasible way for storable agricultural products to buffer production shocks and to stabilize domestic price in the context of agricultural price fluctuations with high frequency, and limited function of the WTO with respect to restricting governments' trade policies.

Date: 2019
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