Prospect Group Policy Research Working Papers -- Recent Issues
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Policy Lessons from International Commodity Agreements: Failure of Non-Oil Pacts and the Endurance of OPEC (March 2026)
Commodity price volatility—along with energy and food security concerns—has renewed interest in supply- and demand-management schemes. This paper revisits experiences of international commodity agreements. Historically, agreements covering non-oil commodities involved both producers and consumers and employed various policy tools such as inventory and trade flow management. While some initially stabilized prices, all eventually failed or disbanded, often amplifying price volatility. In contrast, the Organization of the Petroleum Exporting Countries, a producer-only arrangement, has endured longer but faces challenges from the energy transition, alternative sources of oil, and consumer responses including energy diversification, efficiency gains, policy coordination, and strategic reserves under the auspices of the International Energy Agency. These experiences offer cautionary lessons for current proposals advocating industrial commodity cartels or global food inventory management. Nonetheless, international coordination, particularly in energy conservation, food aid, and information sharing, remains relevant. During periods of severe market disruption, collaboration on inventory management and trade flow regulations may still offer benefits.
Not All Shocks Are Shared Equally: Commodity Exporters and International Risk Sharing (January 2026)
Using world commodity prices as an instrument, this paper proposes a novel method for decomposing channels of international risk sharing for commodity-exporting countries. The method identifies the commodity “sector”' as the projection of gross national product growth on commodity-price growth, and the non-commodity “sector”' as its orthogonal complement. The findings show that commodity-price-induced risk is shared significantly more than other risks, in particular via pro-cyclical government savings, but also via counter-cyclical net international factor income.
Investment in Emerging and Developing Economies (January 2026)
The world faces a pressing challenge to meet key development objectives amid slowing growth and rising macroeconomic and geopolitical risks. With the number of job seekers rising rapidly, infrastructure shortfalls continuing to be large, and climate costs mounting, the case for a significant investment push has never been stronger. Yet the capacity to respond in many emerging markets and developing economies has eroded. Since the global financial crisis, investment growth has slowed to about half its pace in the 2000s, with both public and private investment weakening. Foreign direct investment inflows—a critical source of capital, technology, and managerial know-how—have also fallen sharply and become increasingly concentrated, leaving low-income countries with only a marginal share. The risks of further retrenchment are significant, as trade tensions, policy uncertainty, and elevated debt levels continue to weigh on investment. Reigniting momentum will require ambitious domestic reforms to strengthen institutions, rebuild macro-fiscal stability, and deepen trade and investment integration—the foundations of a supportive business climate. At the same time, international cooperation is indispensable. A renewed commitment to a predictable system of cross-border trade and investment flows, combined with scaled-up financial support and sustained technical assistance, is essential to help emerging markets and developing economies—especially low-income countries and economies in fragile and conflict situations—bridge financing gaps and implement the domestic reforms needed to restore investment as an engine of growth, jobs, and development.
How Much Do Commodity Exporters Share Risk? (January 2026)
Commodity-exporting countries face important challenges in shielding their economies from commodity price volatility. In an ideal world, a country would buy and sell foreign assets to insure itself against volatility caused by the destabilizing economic impact of gross domestic product fluctuations over time. The literature on the topic, which has mainly focused on risk sharing across advanced economies, has found a puzzlingly low amount of risk sharing. Using a sample of 110 countries between 1995 and 2019, this paper finds that commodity exporters share 46 percent of their risk as a group internationally, significantly more so than non-commodity exporters, which share about 33 percent of their risk. The greater the volatility of commodity terms of trade, the more a country shares risk internationally. Consequently, energy and metals exporters share risk more than agricultural exporters. Government saving is the main risk-sharing mechanism in commodity-exporting and non-exporting countries, although it is more important for commodity exporters. Commodity-exporting countries are also more likely to smooth gross domestic product fluctuations through net purchases of assets abroad, while non-commodity exporters tend to self-insure through procyclical domestic investment.
Last Updated: Apr 30, 2026