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Abstract:
Notwithstanding the tariffication component of the Uruguay Round Agreement on Agriculture, import tariffs on farm products continue to provide an incomplete indication of the extent to which agricultural producer and consumer incentives are distorted in national markets. As well, in developing countries especially, non-agricultural policies indirectly impact on agricultural and food markets. Empirical analysis aimed at monitoring distortions to agricultural incentives thus need to examine both agricultural and non-agricultural policy measures including import or export taxes, subsidies and quantitative restrictions plus domestic taxes or subsidies on farm outputs or inputs and consumer subsidies for food staples. This paper addresses the practical methodological issues that need to be faced when attempting to undertake such a measurement task in developing countries. The approach is illustrated in two ways: by presenting estimates of nominal and relative rates of assistance to farmers in China for the period 1981 to 2005; and by summarizing estimates from an economy-wide CGE model of the effects on agricultural versus non-agricultural markets of the project's measured distortions globally as of 2004.

non-tariff barriers, agricultural and trade policies, distorted incentives, tariffs

Abstract:
Notwithstanding the tariffication component of the Uruguay Round Agreement on Agriculture, import tariffs on farm products continue to provide an incomplete indication of the extent to which agricultural producer and consumer incentives are distorted in national markets. Especially in developing countries, non-agricultural policies indirectly impact agricultural and food markets. Empirical analysis aimed at monitoring distortions to agricultural incentives thus need to examine both agricultural and non-agricultural policy measures including import or export taxes, subsidies and quantitative restrictions, plus domestic taxes or subsidies on farm outputs or inputs and consumer subsidies for food staples. This paper addresses the practical methodological issues that need to be faced when attempting to undertake such a measurement task in developing countries. The approach is illustrated in two ways: by presenting estimates of nominal and relative rates of assistance to farmers in China for the period 1981 to 2005; and by summarizing estimates from an economy-wide computable general equilibrium model of the effects on agricultural versus non-agricultural markets of the project's measured distortions globally as of 2004.

Agribusiness, Economic Theory & Research, Emerging Markets, Currencies and Exchange Rates, Debt Markets

Abstract:
This paper uses a dynamic optimization model to estimate the welfare gains of hedging against commodity price risk for commodity-exporting countries. The introduction of hedging instruments such as futures and options enhances domestic welfare through two channels. First, by reducing export income volatility and allowing for a smoother consumption path. Second, by reducing the country's need to hold foreign assets as precautionary savings (or by improving the country's ability to borrow against future export income). Under plausibly calibrated parameters, the second channel may lead to much larger welfare gains, amounting to several percentage points of annual consumption.

Commodities, Commodity price fluctuations, Cross country analysis, Developing countries, Economic models, Export earnings, Export markets, Financial instruments, Financial risk, Hedge funds, International trade, Risk management

Abstract:
Contrary to the prediction of benchmark neoclassical models, growth accelerations in developing countries tend to be associated with current account improvements, resulting from larger increases in saving than in investment. I argue that this can be driven by the behavior of entrepreneurs facing incomplete financial markets and risky investment. The uninsurable risk of losing invested capital forces entrepreneurs to rely on self-financing to build up their firms. As new business opportunities open up, entrepreneurs increase their saving to finance the investment that produces growth. The key insight is that saving has to rise more than investment in order to allow also for the accumulation of precautionary assets. As a consequence, entrepreneurs generate a net saving increase that sustains persistent net capital outflows. Plausibly calibrated simulations produce sizeable quantitative effects. I then show that the introduction of state contingent claims reduces capital out flows, speeds up growth and leads to substantial welfare gains.

capital flows, growth, entrepreneurship, idiosyncratic risk, heterogeneity, financial underdevelopment, saving

Abstract:
This paper uses a dynamic optimization model to estimate the welfare gains of hedging against commodity price risk for commodity-exporting countries. We show that the introduction of hedging instruments such as futures and options enhances domestic welfare through two channels. First, by reducing export income volatility and allowing for a smoother consumption path. Second, by reducing the country's need to hold foreign assets as precautionary savings (or by improving the country's ability to borrow against future export income). Under plausibly calibrated parameters, the second channel may lead to much larger welfare gains, amounting to several percentage points of annual consumption.

commodity exports, default, futures, hedging, international reserves, options, precautionary savings

Abstract:
This paper uses a dynamic optimization model to estimate the welfare gains of hedging against commodity price risk for commodity-exporting countries. We show that the introduction of hedging instruments such as futures and options enhances domestic welfare through two channels. First, by reducing export income volatility and allowing for a smoother consumption path. Second, by reducing the country's need to hold foreign assets as precautionary savings (or by improving the country's ability to borrow against future export income). Under plausibly calibrated parameters, the second channel may lead to much larger welfare gains, amounting to several percentage points of annual consumption.

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