Buffer Stocks

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Buffer Stocks

Buffer Stocks and International Trade Economy

In relation to international trade economy, Christopher Mark (1993) provided the following definition of Buffer Stocks: Commodity stocks managed by countries or international organizations to moderate market price fluctuations. When prices rise above a pre-set ceiling, buffer stocks are sold, lowering market prices. When prices fall below an established floor price, buffer stocks are purchased, raising prices. Buffer stocks can limit price fluctuations in the short run, but are less effective and expensive to maintain during long- term price declines. Buffer stocks are a common feature in various countries' farm programs as well as in some international commodity agreements (Sec. I).

Buffer Stocks in International Trade

Meaning of Buffer Stocks, according to the Dictionary of International Trade (Global Negotiator): Commodity stockpiles managed in such a way as to moderate price fluctuations. Goods may be sold from a stockpile when prices reach or approach predetermined ceiling prices, and they may be purchased for the stockpile when prices reach or approach a predetermined floor level.

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