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Periodical article Periodical article Leiden University catalogue Leiden University catalogue WorldCat catalogue WorldCat
Title:The Effect of Stable Export Prices on GNP (Gross National Product) in a Developing Country: The Case of Kenya
Author:McMahon, Gary
Year:1986
Periodical:Eastern Africa Economic Review
Volume:2
Issue:2
Period:December
Pages:169-181
Language:English
Geographic term:Kenya
Subjects:prices
coffee
national accounts
Economics and Trade
international relations
Abstract:This study uses the computable general equilibrium (CGE) model to examine whether or not stable prices for coffee would have stabilized revenues and/or GNP for Kenya, Net gains for the Kenyan economy of stable coffee prices from 1964 to 1969 are estimated and analysed. The conditions under which price stabilization is most likely to be effective for individual countries are discussed. It concludes that the stabilization of coffee prices could have had an important stabilizing effect on Kenya's export earnings and GNP, and that the gains or losses which coffee price stabilization would have given to Kenya's average GNP were dependent on the ease of substitution between domestic and imported goods in the economy. However, the ability to substitute or not mattered only in years of very large price fluctuations. Whether or not a country will benefit from a price stabilization scheme depends on whether external shocks are large enough to push the economy out of its 'Leijonhufvud corridor'. Bibliogr., notes.
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