The Impact of Price Fixation on Export Stability

Abstract

One of the elements in UNCTAD’s package proposal for an integrated commodity agreement is the stabilisation of the prices of the major commodities exported by third world countries in order to limit fluctuations in their export earnings. According to UNCTAD, a price stabilisation policy using buffer stock schemes will result in more stable export earnings; in other words, price instability is the major cause of the instability of export earnings. Coppock, however, drew the following conclusion from his study: ‘The instability index for export quantum is much more important than that for export prices as a determinant of the export value instability index’, which he saw as ‘a very surprising result, utterly at variance with widely held opinions that export price instability is a major source of export value instability’.¹