Good times on the commodity price rollercoaster: but how long can they last?

This paper starts from the premise that commodity prices are at their highest levels in decades, driven by strong demand from the emerging economies of China and India coupled with increased American consumption. This is good news for developing countries, since 37 of them rely on primary commodities for more than half their merchandise export earnings. However, the authors speculate about what will happen when the commodity price bubble bursts.

The paper notes that a way of offsetting negative consequences from a commodity crash would be to pursue effective modes of income stabilisation, providing countries and producers with reliable and predictable incomes from their exports. It argues that this can be achieved with better revenue management, fairer trade, subsidy reduction, “rainy-day” funds, etc.