Domestic Price Stabilization Schemes in Developing Countries

Abstract

Preoccupation with the presumed adverse effects of price instability has led developing countries to establish a wide variety of mechanisms to stabilize domestic prices, not only of internationally traded goods but of nontraded goods as well. However, despite the ubiquity of such schemes, and the obvious importance with which price stabilization is regarded, the development literature is virtually mute on their characteristics and how they have performed.' In this article, we discuss the topic of domestic price stabilization programs in a comparative cross-country context. We do not examine here the question of whether instability has adverse or positive economic effects, as a burgeoning literature continues to debate this issue. Rather, we take as given that stabilization is a desideratum of virtually all governments in the developing world. Our goals are to describe some of the characteristics of the different schemes used to stabilize