Terms Of Domestic Prices Research Articles

International Food Price Volatility: Transmission to Domestic Prices and Policy Response in Bolivia and Peru

World food prices surged strongly in recent years, with two waves of rising prices in 2007-08 and 2010-11. For food-importing countries affected at the same time by significant levels of undernourishment and malnutrition, sudden rises in the international price of food may have a strong impact on domestic prices and greatly affect access to food. Such is the case of two South American countries: Bolivia and Peru, which pursued quite different policies affecting the transmission of international commodity price changes into domestic consumer prices for major food items. This paper examines policies enacted in both countries at the macroeconomic and sectoral level, and the outcome in terms of domestic prices.

The Criterion of Efficiency of Foreign Trade in Soviet-Type Economies

As has been remarked in an incisive Hungarian study, the original Soviet doctrine of foreign trade, carried to its logical conclusion, equated autarchy with socialism.' It is therefore hardly surprising that for years Soviet theory was signally unconcerned about criteria for policy choices involving foreign trade. However, since the last war, the creation around the U.S.S.R. of what is termed the socialist world market has brought such issues increasingly to the attention of Soviet economists. Moreover, the inclusion in this market of Central European countries, organically more dependent on foreign commerce and much more extrovert by nature,2 has further enhanced their importance. (A contributing factor has been the new appreciation, since the late 1950s, of the importance of trade with capitalist countries and the politically uncommitted underdeveloped areas.) This is indeed a field in the economics of socialism in which Soviet students and Soviet practice avowedly look today to Central Europe for theoretical enlightenment and empirical lessons. The most recent trend towards fuller integration of the economies associated within the Council for Mutual Economic Aid (C.M.E.A.) has made imperative the development of principles of comparative advantage within the group, for the socialist international division of labour . In Soviet-type economies the State's foreign trade monopoly forms, as it were, a clearing house for the imputation of foreign-currency expenditures and receipts in terms of domestic prices. Its agencies buy goods at home for export, and sell imported goods at domestic transfer prices. Differences between these prices and foreign prices, at the official rate of exchange, give rise to budgetary levies and subsidies. The resulting insulation of domestic price and cost relationships has been seen as a vital element in the framework for planned and rapid economic growth.3 It is only very recently, as the economy has approached maturity, that the independence of the rate of exchange in this sense has ceased to be treated in the Soviet Union itself as an unqualified virtue: comments on the 1960/61 currency reform seem to point to some change of attitude. It may be noted that in the second half of the 1950s a strong current in Polish economics. insDired