What role does commodity price volatility play in the problems facing developing countries?
The uncertainty generated from commodity price fluctuations hampers growth and is associated with increases in poverty. The inability to manage uncertainty makes it difficult for producers to plan their crops, allocate their resources, obtain credit for inputs, and recover costs. It also weakens the ability of governments to maintain a conducive and stable environment for domestic business and to implement policies and programs to reduce poverty. Studies show that the price effect was the most significant determinant of export earnings volatility for the vast majority of agricultural commodities between 1970 and 1995. Volatility studies of all major non-oil exports of developing countries from 1962 to 1981 also show a larger unit-value volatility than quantity volatility. What attempts have been made to deal with volatility? Over the past half century, the international community has come up with stabilization or compensatory mechanisms to help developing countries alleviate the negati
