Eric Monke

Market Integration: An Application to International Trade in Cotton

Agricultural commodities are differentiated frequently by quality or country of origin. This paper proposes two complementary tests—bivariate price regressions and hedonic index estimation—as methods to identify whether differentiated products are amenable to treatment as a homogenous commodity. These price linkage tests represent necessary, rather than sufficient, conditions for aggregation and must be supplemented by information on market structure. Analysis of the international cotton market suggests a distinction between extra long and other staple lengths, but not by country of origin after controlling for staple length.

Expanding the policy dimension of farming systems research

Abstract The contribution of economics to farming systems research (FSR) has usually been restricted to the microeconomic analysis of alternative agricultural production technologies. In the traditional approach to FSR, macroeconomic variables and government policies are treated as exogenous. This paper discusses one method for expanding the policy analysis dimension of FSR. The policy analysis matrix method allows for the explicit treatment of macroeconomic and sectoral policies, and it builds logically on the wealth of technical and microeconomic data traditionally utilized in FSR. Examples from Portuguese agriculture are used to illustrate the method.

Welfare Effects of a Processing Cartel: Flour Milling in Portugal

In response to pressures to ease the pace of adjustment to free competition, some governments permit a domestic industry to reap excess profits by forming a cartel to restrict output and raise consumer prices. The scope for pernicious cartel policy can be greater when the industry is a processor of primary commodities because there is often less need to protect the processing cartel from import competition. Transportation costs for many processed products are much larger than those for the raw material, and these differentials create natural barriers to trade. The wide difference between the potential c.i.f. price for imports and the potential f.o.b. price for exports causes the processed product to become a nontradable good, with price determined purely by domestic demand and supply conditions. The degree of competition among domestic firms then becomes a key determinant of the margins provided to processing activities, and industrial cartels can reap large monopoly profits even if the government does not enact a protective trade policy. In such circumstances, it is not possible to use trade policy to limit the effects of a government-enforced cartel. The Portuguese flour-milling industry provides an interesting case study of the influence of government cartel, trade, and input policies on a processing industry. Relative susceptibility to moisture damage, a multiplicity of qualities, and relatively high handling costs make international trade in flour less attractive than commerce in wheat.1 For

Surplus Disposal in World Markets: An Application to Egyptian Cotton

In many countries, agricultural exports are managed directly by governments. A frequent problem encountered by policy makers involves the accumulation of unwanted surpluses caused by domestic price support programs, unforeseen declines in world demand, or unexpected shifts in the domestic supply-demand balance. This paper examines the intertemporal use of the world markets as a means to eliminate these surpluses. The analytical results follow directly from the theory of storage. They are applied to an analysis of the Egyptian ELS cotton market, where stock levels in the early 1980s became about six times as large as normal carryout. Estimation results suggest that optimal disposal plans may frequently involve selling surplus stocks in a single year.

Trade policies and variability in international grain markets

Abstract Increased instability in international market prices has created new problems for trade participants, particularly developing countries. However, it seems that importing country policies are primarily responsible for market variability. In most cases, a trade-reliant strategy appears more effective than an alternative policy of self-sufficiency. As long as countries continue to subsidize domestic consumption, international market controls appear likely to remain as key components of grain policy in importing countries.

Traded and non-traded goods : An empirical test with Nigerian data

Abstract An income expenditure model is used to describe the relationship between the balance of payments and price inflation of non-traded goods. Real and monetary approaches to the balance of payments suggest different relationships among these variables, and compatible elements of the monetary approach are incorporated into the income-expenditure model. The model is then tested with Nigerian data for the period 1960–1979. The pattern of economic growth and conduct of monetary policy make the Nigerian economy a convenient test of the empirical significance of these macroeconomic relationships.