Price stabilization on world agricultural markets. An application to the world market of sugar (Q1310804)

The scope of the study is as follows: In Part I, a partial equilibrium model for the domestic market of an agricultural product is introduced. Under the assumptions of risk neutral producers and protectionist government policies the desirability of price stabilization on the world market is established. Aggregating the country models gives a model for the world market in which no equilibrium in rational expectations exists. A linearized version of this model can then be used to analyse the cyclical pattern of world market prices. Part II starts with a description of the institutional aspects of the world sugar economy. Production functions are estimated which make it possible to distinguish between a systematic and a stochastic component of production. The world market price is then tested for its influence on systematic excess production with the finding that the null hypothesis of independence can only be rejected for lagged prices. This justifies the use of a time series model in the spirit of Part I. The estimates of its structural relationships are obtained under the implicit hypothesis that the International Sugar Agreements have been completely ineffective. Part III gives a detailed account of the mechanisms of the International Sugar Agreements of 1968 and 1977. Tests for structural change to the functional relationships estimated in Part II are performed. Whenever the hypothesis is rejected, the functions are reestimated under the alternative hypothesis of two distinct regimes. These results are used to evaluate the expected effects of the International Sugar Agreements by means of simulations.