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Political Economy of Trade and Storage Policies Coordination, and the Role of Domestic Public Storage in the World Market

Author

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  • Wenshou Yan

    (School of Economics, University of Adelaide)

Abstract

In this paper, a standard theoretical model of trade policy is extended to incorporate domestic public storage policy, so as to explore government political motivations in the context of border and domestic policy coordination. Theoretically, domestic storage policy can add to price stabilization in the presence of trade policy, and can reinforce a price-insulating trade policy through increasing the countryÂ’s market power. However, the effects of these two price stabilization instruments on the international market price are in opposite directions. Furthermore, the effect of domestic public storage on the world market is then tested, using China cotton as a case study. The VAR econometrics reveal that in the case of cotton during 2011-14, China as a large player in the global market was able to stabilize to a non-trivial extent the international price of cotton through altering its public stockpile.

Suggested Citation

  • Wenshou Yan, 2016. "Political Economy of Trade and Storage Policies Coordination, and the Role of Domestic Public Storage in the World Market," School of Economics and Public Policy Working Papers 2016-16, University of Adelaide, School of Economics and Public Policy.
    • Handle: RePEc:adl:wpaper:2016-16
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    File URL: https://media.adelaide.edu.au/economics/papers/doc/wp2016-16.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Public storage policy; Trade policy; Policy coordination; World cotton price; VAR simulation; China;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E64 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Incomes Policy; Price Policy
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade

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