Optimal control theory is used to analyze the implications of the adoption of price and LDC export revenue stabilization objectives by an international buffer stock for cocoa. The results obtained for the period 1956-76 suggest that the stabilization of either price or revenue at systematic trend would reduce the instability of both variables from that during the sample period. Although the stabilization of revenues at systematic trend decreases their average level, the stabilization of price has the opposite effect. Because of this, it may be financially feasible for the LDCs to provide the necessary resources for a price-stabilizing buffer stock.
All Science Journal Classification (ASJC) codes
- Economics and Econometrics