Sustainability of Regional Reserves When Default Is Possible

Randall S. Romero-Aguilar and Mario Miranda ()

No 205773, 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California from Agricultural and Applied Economics Association

Abstract: We model a regional grain reserve as a game of two countries that agree to pool together a fraction of their grain to cope with production risk, but that can also repudiate their obligations at any moment. The reserve can be operated as a “credit union” or an “insurance union”. We find that although risk sharing is more effective when production shocks are negatively correlated, the regional reserve is more sustainable when the correlation is positive. We also find that an “insurance” game can be more sustainable than a “credit” game.

Keywords: Agricultural and Food Policy; Food Security and Poverty; International Development; International Relations/Trade; Risk and Uncertainty (search for similar items in EconPapers)
Pages: 14
Date: 2015
New Economics Papers: this item is included in nep-ias
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea15:205773

DOI: 10.22004/ag.econ.205773

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