thar she bursts reducing confusion reduces bubbles to explore why bubbles frequently emerge in the experimental asset market model of smith suchanek and williams 1988 we vary the fundamental value process constant or declining and the cash to asset value ratio constant or increasing we observe high mispricing in treatments with a declining fundamental value while overvaluation emerges when coupled with an increasing c a ratio a questionnaire reveals that the declining fundamental value process confuses subjects as they expect the fundamental value to stay constant running the experiment with a different context stocks of a depletable gold mine instead of stocks significantly reduces mispricing and overvaluation as it reduces confusion jel c91 d14 g11 g12

price relations between export and domestic rice markets in thailand abstract many rice importing countries argue that rice exporting nations isolate their domestic markets through the use of stabilization pricing policies which cause international rice markets to become excessively volatile for the argument to hold any weight price transmission between exporting countries domestic and export markets should be unidirectional whereby export prices are driven by domestic prices but domestic prices are not affected by export prices the study tests the hypothesis on thailand traditionally the world s largest rice exporter the results from the causality tests are not entirely clear however the results from the impulse response functions show that while the shocks originating in the domestic market are higher in magnitude in the export market in the short run the shocks originating in the export market are more persistent in the domestic market this suggests that although thailand s domestic policies are somewhat effective in the immediate months after the shock they allow price transmission from its export market to transfer over to its domestic market in the long run the results therefore imply that thailand s domestic pricing programs are not heavily distorting world rice markets

bubbles crashes and endogenous expectations in experimental spot asset markets1 spot asset trading is studied in an environment in which all investors receive the same dividend from a known probability distribution at the end of each of t 15 or 30 trading periods fourteen of twenty two experiments exhibit price bubbles followed by crashes relative to intrinsic dividend value when traders are experienced this reduces but does not eliminate the probability of a bubble the regression of changes in mean price on lagged excess bids number of bids minus the number of offers in the previous period p pt a f b 1 o l supports the hypothesis that a e d the one period expected value of the dividend and that f 0 where excess bids is a surrogate measure of excess demand arising from homegrown capital gains losses expectations thus when bt 1 o goes to zero we have convergence to rational expectations in the sense of fama 1970 that arbitrage becomes unprofitable the observed bubble phenomenon can also be interpreted as a form of temporary myopia tirole 1982 from which agents learn that capital gains expectations are only temporarily sustainable ultimately inducing common expectations or priors tirole 1982 four of twenty six experiments all using experienced subjects yield outcomes that appear to the chart s eye to converge early to rational expectations although even in these cases we get 0 and small price fluctuations of a few cents that invite scalping

state intervention for food price stabilisation in africa can it work abstract although its arguments may have more general applicability this paper discusses the desirability and options for the stabilisation of staple food prices principally in eastern and southern africa it addresses three broad questions i why is stabilisation of food grain prices desirable ii what is technically feasible and iii can the governance and trade issues thrown up by suggested mechanisms be solved it considers a number of options for price stabilisation assessing the strengths and weaknesses of each and suggesting situations in which each may be appropriate

countercyclical safety nets for the poor and vulnerable abstract relatively little is known about how government safety net programs insure against low consumption and stabilize asset bases compared to what is known about their role in transferring income the insurance function requires a flexible budget that can be scaled up rapidly to meet unanticipated circumstances safety nets serving an insurance function also differ from other transfer programs in their targeting they need to determine transitory need rather than more chronic correlates of poverty moreover insurance safety nets need a more flexible implementation strategy than do more permanent programs this paper reviews these issues from the perspective of low income countries

developing agricultural markets in sub saharan africa organic cocoa in rural uganda abstract this article investigates the process of development in a traditional african export market focusing on a contract farming scheme for organic cocoa in rural uganda based on a repeated household survey we measure the impact of the scheme on the income of participants and the economic mechanisms behind these effects we find substantial benefits from the scheme driven primarily by the establishment of credible incentives for farmers to adopt technologies which improve cocoa quality there is also evidence of broader trends of market deepening and increased productivity probably due to positive spillovers

the impact of monetary policy on stock market bubbles and trading behavior evidence from the lab we investigate the effect of monetary policy on stock market bubbles and trading behavior in experimental asset markets we introduce the possibility of investing in interest bearing bonds to the widely used laboratory asset market design of smith et al 1988 treatment groups face a variable interest rate policy which depends on asset prices while control groups are subjected to a constant interest rate we observe a strong impact of our interest rate policy on liquidity in the stock market but only a small impact on bubbles however we find that announcing the possibility of reserve requirements significantly reduces bubbles

policies to promote cereal intensification in ethiopia the search for appropriate public and private roles over the past decade policymakers have been searching for an appropriate blend of public and private sector roles to accelerate the intensification of food staple production smallholder commercialization and sustainable market development in sub saharan africa in ethiopia steps taken to liberalize markets in the 1990s and promote fertilizer and seed packages have yet to generate payoffs in terms of higher cereal yields lower food prices or reduced dependency on food aid this raises concern about the performance of the agricultural sector specifically in terms of the systems for providing improved seed fertilizer credit and extension services this paper examines the evolving roles of the public and private sectors in intensifying cereal production in ethiopia findings suggest that while ethiopia has an admirable record of supporting agriculture its state led policies has now outlived their usefulness these findings for ethiopia offer lessons that are potentially applicable to other sub saharan african countries facing similar challenges

grain price stabilization experiences in asia what have we learned abstract governments in most asian countries used grain price stabilization as a major policy instrument when they embarked on promoting the green revolution the art of public policy making is to know when to introduce government interventions and when to withdraw the common mistake is to forget the withdrawal part leading to unsustainably high costs a dilemma that most asian countries are confronted with today analyzing case studies of six asian countries which have tried to tackle the task in different ways with varying degrees of success eight key lessons can be learned from the more than three decades of food price stabilization in asia times have changed policies and public agencies that may have been appropriate 30 years ago are not optimal today private institutions have strengthened significantly or could be strengthened significantly and should be entrusted for many of the functions that parastatals or other government agencies have traditionally performed holding on to old practices delays reaping the benefits that changing current policies have to offer

impact of food price volatility on the us restaurant sector although fluctuations in agricultural commodity prices appear to be a source of risk to the us restaurant sector the effect that volatility of food price has on the performance returns of that s

to see is to believe common expectations in experimental asset markets abstract we experimentally manipulate agents information regarding the rationality of others in a setting in which previous studies have found irrationality to be present namely the asset market experiments introduced by smith et al 1988 recent studies suggest that mispricing in such markets may be an artefact of confusion which can be reduced by training subjects to understand the diminishing fundamental value we reconsider this view and propose that when it is made public knowledge that training has occurred this may also reduce uncertainty over the behavior of others and facilitate the formation of common expectations our design disentangles the direct effect of training from the indirect effect of its public knowledge and our results demonstrate a distinct and statistically significant effect of public knowledge over and above that of training alone

managing food price risks and instability in a liberalizing market environment overview and policy options abstract managing food price risks and instability is a major challenge in the midst of ongoing food market reforms key findings from the papers in this special volume revolve around five broad areas i the sources and magnitudes of food price instability in different country contexts ii the economic and social costs stemming from price instability iii the lessons from food market reforms to date iv the design of policy reforms in ways that promote efficient and stable market development and protect the interests of the poor and v potential policy responses to food price instability in a liberalizing market environment

food security and storage in the middle east and north africa in times of highly volatile commodity markets governments often try to protect their populations from rapidly rising food prices which can be particularly harsh for the poor a potential solution for food deficit countries is to hold strategic reserves which can be called on when international prices spike but how large should strategic stockpiles be this paper develops a dynamic storage model for wheat in the middle east and north africa mena region where imported wheat dominates the average diet the paper uses the model to analyze a strategy that sets aside wheat stockpiles which can be used when needed to keep domestic prices below a targeted price this paper shows that if the target is set high and reserves are adequate the strategy can be effective and robust contrary to most interventions strategic storage policies are counter cyclical and when the importing region is sufficiently large a regional policy can smooth global prices this paper shows that this is the case for the mena region nevertheless the policy is more costly than the pro cyclical policy of a targeted intervention that directly offsets high prices with a subsidy similar to food stamps

food value chain transformations in developing countries selected hypotheses on nutritional implications we examine how the transformation of food value chains fvcs influence the triple malnutrition burden undernourishment micronutrient deficiencies and over nutrition in developing countries we propose a fvc typology modern traditional modern to traditional and traditional to modern that takes into account the participants the target market and the products offered next we propose selected hypotheses on the relationship between each fvc category and elements of the triple malnutrition burden the primary finding is that the transformation of fvcs creates challenges and opportunities for nutrition in developing countries for example modern fvcs may increase over nutrition problems and alleviate micronutrient deficiencies for urban people with relatively high incomes however they have little nutritional impacts among rural residents and urban poor people who primarily depend on traditional fvcs to access adequate quantities of calories and micronutrients in addition modern food manufacturers are leveraging traditional distribution networks modern to traditional fvcs substantially increasing access to low priced processed packaged foods in rural areas and low income urban neighbors with mixed impacts on the triple burden of malnutrition further research should focus on the influence of fvc transformation on reduction of micronutrient deficiencies on modeling demand substitution effects across food categories and the attendant policy implications for malnutrition

the role of warehouse receipt systems in enhanced commodity marketing and rural livelihoods in africa most african countries have since the 1980s liberalised agriculture without experiencing food crisis as feared by sceptics but the outcome of reforms has been rather disappointing and agricultural markets remain underdeveloped and inefficient one means to improve agricultural marketing which is the focus of this paper is to develop regulated warehouse receipt wr systems the system will curtail cheating on weights and measures ease access to finance at all levels in the marketing chain moderate seasonal price variability and promote instruments to mitigate price risks it will also reduce the need for the government to intervene in agricultural markets and reduce the cost of such interventions if needed the major problem in establishing wr systems in africa is disabling elements in the policy environment drawing on experience from projects implemented in africa during the last decade 1 the authors outline how this challenge can be addressed the most crucial being to build strong stakeholder support behind the initiative 2002 elsevier science ltd all rights reserved

searching beyond the lamppost let s focus on economically relevant questions abstract experimental economics is in danger of behaving like the famous drunk who searches for his keys under the light even though he lost them in some dark corner it is argued that we are wasting our time and endangering the respect that other economists have for experimentalists by playing too much with some of our favorite toys like the dictator game rather than focus on new and economically relevant designs

hedging grain price risk in the sadc case studies of malawi and zambia abstract we use simulation methods to examine the results of hedging maize food security imports into malawi and zambia on the south african exchange safex results show that hedging using either futures or options can spread import costs over time thereby reducing variability and also possibly generating lower average costs these benefits are increased if hedging only takes place when local prices are at less than import parity and also if the hedge is levered however problems will remain so long as intra regional transport costs remain high

what can we learn from past price stabilization policies and market reform in mexico abstract this paper reviews experience with policy reforms in the maize sector in mexico beginning in the 1980s with particular reference to impacts on price variability it analyses mexico s transition from past price stabilization policies under a state trading enterprise to market reforms implemented during the 1990s the nature extent and costs to producers and consumers of maize policies is discussed for both the pre reform and the reform periods although wide ranging reforms have been introduced impacts on efficiency and fiscal outlays have been less than expected

asset markets with insider trading disclosure rule and reselling constraint an experimental analysis abstract we investigate the impact of compulsory insider trading disclosure and its combination with a mandatory holding rule on price predictability and asset mispricing we modify the dynamic price adjustment model to account for insiders private information our results show that insiders produce weakly characterized price signals that induce a less than proportional price adjustment to the changes in the dividend value in both markets with disclosure rule and holding requirement in comparison with unregulated markets a shift in insiders strategies from information motivated to liquidity motivated trading appears to fuel the impairment of price predictability in regulated markets the exacerbation of asset mispricing in markets with holding restriction is characterized by a growth in the speculative transactions and loss making trading proposals

the use of organized commodity markets to manage food import price instability and risk the article explores the possibility of insuring the price risks of wheat and maize imports of low income food deficit countries lifdcs optimal strategies for an importing agent who hedges with futures and options are derived based on the objective of minimizing the unpredictability of import bills ex post simulations for a set of lifdcs are run on wheat and maize imports hedged with futures and options in the chicago board of trade to explore the extent to which hedging reduces the unpredictability in import bills simulations encompass both periods of normal price behavior as well as the period of global upheaval that occurred in 2007 and 2008 results show that hedging with futures alone affords agents considerable opportunities for reducing import cost unpredictability and the same holds with options albeit to a lesser extent however during the recent price spike of 2007 2008 hedging with options would have increased the unpredictability of some countries maize import bills due to the combination of erratic import patterns and pronounced market uncertainty

federal deficits and money growth in the united states a vector autoregressive analysis abstract a multivariate var modelling technique is employed in this paper to test for causality between federal deficits and money growth in the united states four alternative causality hypotheses including the common accommodation view are examined in addition to the two policy variables four other related macro variables are included in the empirical analysis namely short term interest rates prices real output and exchange rates the var results consistently reject the accommodation hypothesis and indicate that monetary and fiscal policy actions are set independently in the united states other causality inferences are also obtained and their implications are discussed

government spending growth and poverty in rural india using state level data for 1970 93 a simultaneous equation model was developed to estimate the direct and indirect effects of different types of government expenditure on ruralpoverty and productivity growth in india the results show that in order to reduce rural poverty the indian government shoul d give highest priority to additionalinvestments in ruralroads and agricul turalresearch these types of investment not only have much larger poverty impacts per rupee spent than any other government investment but also generate higher productivity growth apart from government spending on education which has the third l argest marginalimpact on ruralpoverty and produc

exploring the logic behind southern africa s food crises summary government action during food crises in southern africa frequently exacerbates the problems driving food staple prices well beyond import parity we argue that an inability to make credible commitments due largely to a lack of trust between public and private sectors contributes to this dynamic empirical policy analysis can facilitate resolution only within a consultative process involving a broad range of stakeholders the policies emerging from such a process are not likely to approximate first best recommendations yet the precise policies may be less important than the fact that they exist and that main stakeholders find them credible

food price volatility in sub saharan africa has it really increased the food price crisis of 2007 2008 and recent resurgence of food prices have focused increasing attention on the causes and consequences of food price volatility in international food markets and the developing world particularly in sub saharan africa in this paper we examine the patterns and trends in food price volatility using an unusually rich database of african staple food prices we find that international grain prices have become more volatile in recent years 2007 2010 but no evidence that food price volatility has increased in the region this contrasts with the widespread view that food prices have become more volatile in the region since the global food crisis of 2007 2008 in addition the results suggest that price volatility is lower for processed and tradable food than for nontradable food that volatility is lower in the major cities than in secondary cities and that maize price volatility is actually higher in countries with the most active intervention to stabilize maize prices these findings suggest that greater attention should be given to the high level of food prices in the region rather than volatility per se that regional and international trade can play a useful role in reducing food price volatility and that traditional food price stabilization efforts may be counterproductive

regional trade government policy and food security recent evidence from zambia given heavy dependence on rainfed maize production countries in east and southern africa must routinely cope with pronounced production and consumption volatility in their primary food staple typical policy responses include increased food aid flows government commercial imports and stock releases and tight controls on private sector trade this paper examines recent evidence from zambia using a simple economic model to assess the likely impact of maize production shocks on the domestic maize price and on staple food consumption under alternative policy regimes in addition to an array of public policy instruments the analysis evaluates the impact of two key private sector responses in moderating food consumption volatility private cross border maize trade and consumer substitution of an alternate food staple cassava for maize the analysis suggests that given a favorable policy environment private imports and increased cassava consumption together could fill roughly two thirds of the maize consumption shortfall facing vulnerable households during drought years

price bubbles gender and expectations in experimental asset markets abstract this paper reports results of laboratory markets for a risky asset with a flat fundamental value that equates expected dividends to the return on a safe asset subjects were sorted by gender in an unobtrusive manner and bubbles in this setting are pervasive and of comparable magnitude for both genders in contrast a robustness check done with a declining fundamental value did generate larger bubbles for groups of males elicited price forecasts tend to trail share prices as they rise and exceed prices as they fall a pattern that is tracked by a double adaptive forecasting model