Managing Price Risk in the Pakistan Wheat Market

The government intervenes in the wheat market in Pakistan toensure food security for consumers and to provide adequate andstable incomes for producers. The cost of this interventionis high, and its impact on the performance of agriculture hasbeen significantly negative. The World Bank is urging policychanges such as removing agricultural trade restrictions, pricesupports, and subsidies. However, policymakers often resistsuch reforms, fearing that they will expose the domestic marketto fluctuating international commodity prices. This article assesses the risk management needs of the sectorand evaluates whether using financial instruments—suchas commodity hedging using futures, options, or swaps—wouldimprove risk management. Simulations based on monthly data for1994 show that market-based methods of risk management couldreduce the impact of international price volatility on the domesticmarket without incurring high government cost or distortingprice signals.     

Family planning and health: the Narangwal experiment

The findings of a 7-year field experiment conducted in the Indian Punjab show that integrating family planning with health services is more effective and efficient than providing family planning separately. The field experiment was conducted between 1968 and 1974 at Narangwal in the Indian State of Punjab. It involved 26 villages, with a total population of 35,000 in 1971-72. The demographic characteristics of the villages were found to be typical of the area. 5 groups of villages were provided with different combinations of services for health, nutrition and family planning. A control group received no project services. A population study was made of the effects of integrating family planning with maternal and child health services. A nutritional study looked at the results of integrating nutritional care and health services. The effectiveness of integration was evaluated by identifying it both with increased use of family planning and improved health. Efficiency was judged by relating effectiveness to input costs. Distribution of the benefits was also examined. The effectiveness of these different combinations of services on the use of family planning was measured: 1) by all changes in the use of modern methods of family planning, 2) by the number of new acceptors, 3) by the changes in the proportion of eligible women using contraceptives, and 4) by how many people started to use the more effective methods. Results showed the use of family planning increased substantially in the experimental groups, whereas the control group remained constant. It was also found that, though the services combining family planning with maternal health care stimulated more use of family planning, they were more costly than the more integrated srevices. The Narangwal experiment provides significant evidence in favor of combining the provision of family planning and health services, but its potential for replication on a large scale needs to be studied.     

Asset Markets and Endogenous Liquidity

In financial markets characterized by imperfect depth, speculative trading will have transitory effects on the market price as market makers must be compensated for the risk of holding the asset. The number of people providing liquidity to a market will generally be endogenously determined by the quantity of liquidity demanded. This paper looks for evidence of endogenous liquidity provision in several international stock and bond markets. Evidence shows strong support for these speculative dynamics in the stock markets. The evidence for these dynamics is less striking with fixed‐income prices, consistent with the less speculative nature of these markets.     

Saving Trends in Southeast Asia: A Cross-Country Analysis

This paper investigates the long-run pattern of private saving in Indonesia, Malaysia, Singapore and Thailand. These countries have not only maintained saving levels that are currently among the highest in the world, but have also experienced a sustained increase in their rate of private saving over the past twenty years. Using a cointegration approach, this paper empirically examines the economic determinants underlying the saving trends in this group and the extent to which these countries share a common experience with respect to the factors accounting for their strong saving performance. The findings suggest that demographic shifts and, to a somewhat lesser extent, rising per capita incomes have been important factors underlying regional saving trends, with broadly similar long-run impacts across countries. Limited evidence to support a significant and common relation between compulsory and total saving in Singapore and Malaysia is also found.     

The impact of farm credit in Pakistan

Both informal and formal loans matter in agriculture. However, formal lenders provide many more production loans than informal lenders, often at a cost (mostly loan default cost) higher than what they can recover. For example, the Agricultural Development Bank of Pakistan (ADBP), providing about 90% of formal loans in rural areas, incurs high loan default costs. Yet, like other governments, the Government of Pakistan supports the formal scheme on the grounds that lending to agriculture is a high risk activity because of covariate risk. Hence, such policies are often based on a market failure argument. As farm credit schemes are subsidised, policy makers must know if these schemes are worth supporting. Using a recent large household survey data from rural Pakistan (Rural Financial Market Studies or RFMS), we have attempted to estimate the effectiveness of the ADBP as a credit delivery institution. A two‐stage method that takes the endogeneity of borrowing into account is used to estimate credit impact. Results reveal that ADBP contributes to household welfare and that its impact is higher for smallholders than for large holders. Nevertheless, large holders receive the bulk of ADBP finance. The ADBP is, thus, not a cost‐effective institution in delivering rural finance. Its cost‐effectiveness can be improved by reducing its loan default cost and partially by targeting smallholders in agriculture where credit yields better results.