The thesis considers the effect of world trade or commodity price volatility on small open economies. It extends the existing literature by including non-tradeable goods and many volatile prices in the model together with consideration of the welfare effects of participation in international risk or capital markets. In addition the thesis systematically addresses the implications of price volatility for resource allocation and presents empirical estimates of the costs and benefits of volatility for a large sample of countries. The most important theme in the analysis is the extent of output flexibility in the face of variable prices. It is shown that price volatility gives rise to high returns to flexibility which suggests that commodity exporting countries should regard price volatility as an opportunity to benefit by being flexible as well as a source of welfare costs. The empirical estimates show that many developing countries have had an inflexible response to changes in world prices over the period 1958-90. Flexibility may improve with the abolition of producer price stabilisation in many countries in the 1980s, a policy reform that is predicted to yield large benefits. These will increase if attempts are also made to improve the functioning of domestic risk and capital markets together with enhanced access to their international equivalents.
| Identifer | oai:union.ndltd.org:bl.uk/oai:ethos.bl.uk:308857 |
| Date | January 1995 |
| Creators | Mash, Richard |
| Publisher | University of Oxford |
| Source Sets | Ethos UK |
| Detected Language | English |
| Type | Electronic Thesis or Dissertation |
| Source | http://ora.ox.ac.uk/objects/uuid:24f115c7-bb18-4018-afbb-bc9322dde275 |
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