THE INFLUENCE OF THE AGRI-MONETARY SYSTEM ON AGRICULTURAL TRADE IN THE EC: THE CASE OF SUGAR

It is hypothesised that the mechanics of the agri-monetary system impose shocks on EC agricultural markets which influence the Community's agricultural trade flows. A model illustrating links between agri-monetary changes and trade flows of sugar is presented. Empirical tests suggest that agri-monetary changes influence the volume and timing of sugar trade. Hypotheses relating the strength of this influence to self-sufficiency and other factors specific to Member States are discussed, as are the welfare costs of agri-monetary trade distortions. Although these welfare costs are unlikely to spark agrimonetary reform, they could be given consideration in the reform made inevitable by the Single European Market.     

THE RELATIONSHIP BETWEEN FOOD PRODUCTION AND CONSUMPTION VARIABILITY: POLICY IMPLICATIONS FOR DEVELOPING COUNTRIES

This paper examines whether there is increased inter-year instability in food consumption at the national level, and to what extent this is attributable to increased instability of food production in the wake of adoption of modern agricultural technology. The data analysed indicates that increased production instability does translate into increased fluctuations in consumption. Nevertheless, year-to-year consumption variability among the sample of 38 countries has declined during the past 25 years. This is attributed to improved stocking operations and trade practices which accompany economic growth. Nevertheless, food insecurity, as measured in terms of fluctuations around trend levels of consumption, does remain a problem, especially among the poor. Therefore, policy options to reduce consumption instability are outlined.     

International Capital Flows in the Model with Limited Commitment and Incomplete Markets

Recent literature has proposed two alternative types of financial frictions, i.e., limited commitment and incomplete markets, to explain the empirical patterns of international capital flows between developed and developing countries in the past two decades. This paper integrates these two frictions into a two-country overlapping-generations framework to facilitate a direct comparison of their respective effects. In our model, limited commitment distorts the investment made by agents with different productivity, which creates a wedge between the interest rates on equity capital vs. credit capital; while incomplete markets distort the investment among projects with different riskiness, which creates a wedge between the risk-free rate and the mean rate of return to risky capital. We show that the two approaches are observationally equivalent with respect to their implications for international capital flows, production efficiency, and aggregate output.