INFLUENCE OF DOMESTIC PRICING POLICIES AND BUFFER STOCKS ON PRICE STABILITY IN THE WORLD WHEAT INDUSTRY

Domestic pricing policies are a major cause of instability in international commodity markets. The modification of such policies could be a viable alternative to buffer stocks in providing stability. A theoretical model of price intervention is developed to show how common forms of intervention destabilize the world market price. A stochastic econometric model is used to show, first, that most countries in the world wheat market have policies which destabilize the wheat market, and, second, that the modification of such policies would prove as effective as a buffer stock policy in stabilizing the wheat market. © 1978 by the American Agricultural Economics Association.