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| Author: | McLaren, J. |
| Title: | Consequences of discretion in the formation of commodities policy |
| Journal: | Journal of Public Economics
1998 : SEP, VOL. 69:3, p. 347-370 |
| Index terms: | Commodity markets Farms Policy |
| Freeterms: | Time consistency |
| Language: | eng |
| Abstract: | In a simple model of endogenous primary-commodity price-support policy, policy is affected by private inventories, and private inventories are affected by speculative attempts to forecast policy. The interaction btw. the two forces is rich, yielding bubbles and extrinsic volatility, thus helping to explain some odd episodes observed in commodity markets. In addition, under some conditions a government that wishes to support the price but is unable to commit to future action may be impotent, and a government that does not want to support the price may be trapped into doing so by speculative activity. |
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