The effect of China's domestic public storage on world market prices: the case of cotton

PurposeDuring world price spike periods, the government is more likely to apply trade distortions to stabilize domestic prices, but the trade distortions would amplify fluctuations of international market prices. Which type of policy may stabilize the domestic market price, but not disturb the international market? This paper answers the question by taking public storage policy as a case study in the context of trade policy. Specially, this paper tries to identify the effect of domestic public storage on the world market price.Design/methodology/approachThis article extends a standard theoretical model of trade policy through incorporating domestic public storage policy and makes the model more applicable in the context of China. The extended model is then applied to analysis how domestic public storage policy affects the international market price in the context of trade policy. Finally, a properly identified structural vector auto-regression technique is applied to test the effect of domestic public storage on the world market price by using cotton data from China.FindingsThe theoretical model indicates that China's public storage policy could stabilize the international market price. In order to test the working mechanisms, China's soaring public storage between 2010 and 2014 is employed to identify the effects of China's cotton storage on the volatility of the world price. The empirical findings show that China was able to stabilize the international price of cotton to a non-trivial extent through alteration of its public stockpile.Originality/valueThe first contribution is that this paper extends a standard theoretical model of trade policy to incorporate domestic public storage policy, which enables us to explore the effects of domestic public storage policy on the world price in the context of China. The second major contribution is that this paper provides evidence that, as a large player in the world market, China's public storage policy could stabilize the international agricultural price to a substantial degree.

THE EFFECT OF PRICE BEHAVIOUR ON INDONESIAN CPO EXPORT QUANTITY

Unpredictable changes in supply and demand may cause the variation of price behavior. Crude Palm Oil (CPO) as Indonesian main export commodity has the highest risk of uncertainty price which is influenced by world price while it tends to fluctuate and become volatile in the given period. In order to increase CPO production, government has implemented biodiesel mandatory regulation namely B30 in 2019. It means that the use of diesel fuel with 20 percent of biofuel content. Besides that, government also applies zero tax policy to stimulate CPO producers in doing export. The objectives of this research are to analyze price volatility and its effect on export volume in the long term. Daily Indonesian CPO price since January 2010 to December 2017 was analyzed by Historical Volatility Method and Cointegration Test. This research shows that both domestic and world price of CPO tends to be high while domestic price is less volatile than world price. Furthermore, CPO’s price and export volume are cointegrated and have negative relation in the long term.

Does Ethiopian Competitive in Export of Coffee so far and What Determines it? Evidence from Revealed Comparative Advantage and Autoregressive Distributed Lag Model

As an export commodity coffee industry contributes to the economies of both exporting and importing countries. The aim of the study involves competitiveness and determinant of coffee export in Ethiopia through the period of 1990–2018 observations. To explain the level of comparative advantage and competitiveness respectively Revealed Comparative Advantage and Syematric Revealed Comparative Advantage were employed. To capture determinans of coffee ARDL model with bound testing to co-integration approach was employed to investigate the long-run association between Ethiopian total coffee export in bags (60kg each) with domestic coffee production, world coffee price, real exchange rate, FDI, world coffee production and price ratio. Even though Ethiopia has the comparative advantage in the export of coffee, however, the share it in the international market low in amount and not inlined with RCA. Bound testing to co-integration approach result confirmed the existence of a long-run relationship between total coffee exports of Ethiopia with its independent variables. The analysis pointed out that in the long run the extent of domestic coffee production, world price, and real exchange rate positively and significantly affects total coffee export. However, FDI, price ratio, world production of coffee have negative & significant effects. In the short-run Ethiopian total coffee export defined as a positive significant function of domestic coffee production and real exchange rate positive but insignificant effect with Level of RCA and world price as well as a negative function of FDI, price ratio, and world production of coffee. Coefficient Error Correction Model (ECM (-1)) was negative and significant with a value of 134.4 % of the adjustment would make each year and return to its long-run equilibrium after 1.3 years. The policy implication calls for addressing issues of the combined effect of the policy setting, institutions, and market failures to avoid the evil effect of the sector.

ANALISIS PENAWARAN DAN PERMINTAAN LADA INDONESIA DI PASAR INTERNASIONAL

<p><strong>Analysis of Indonesian pepper supply and demand in the International Market</strong></p><p>Study on the supply and demand of Indonesian pepper in the international market was conducted by using the data of time series from 1980 to 1999. The data were analyzed using multiple linear regression and two stage least square (2 SLS) estimation method. The result of analysis revealed that the factors affecting pepper supply from Indonesia were international market, world price, pepper production, exchange rate, and the last export volume. The supply export of pepper of each major pepper producing counlircs showed similar characeristics, i.e. die expot of pepper of the countries, including Indonesia was affeclcd signiicantly by the national pepper production. When the price changed, the supply would change with the percentage higher than that of the price change. The demand for pepper import at the elasticity coeicient value smaller than one (0.144 -0.680) meant that it was inelastic. The elasticity coeficient value of the Indonesian pepper supply in the short and long terms was 1 168 and 4.037 respectively. It meant that they were elastic, if the price changed, the supply would change with the percentage higher than thai of the price change. The implication to Ihe pepper industry in Indonesia were (a) the decrease in Ihe pepper price in the international market did not affect the national pepper production, and (b) the exchange rale affect the volume of the pepper export.</p>