IN,ABILITY., ic6[,--,l_U_J2 b_ .P_o_,z,_ _. _r;_#_Z.. "__.
Table
I.
Measure_:-,_o_ Ii.,st,abiliay of
,_- ' 19_.2 _-
1952-i964
I.
Export
IIi.
_V.
•
ExFort
and
!952- _964
_imDort
964-,1982
Indices
Value Volume Price IS.
Ag=reGate
.078 .0_7 .06_
.16 .093 .172
.02 .02 ,01
.03 .02 .03
Value
.079
.I@9
.32
,03
Volume
.097
.08_
.02
.02
Price
.042
.157
.01
Tezz_ .058
.093
.01
.02
Income _'er_s of Trad_ .07_
.0SG
.02
.02
Zmpo.r_. indices
Co1_modi_y of Trad_
S I ÂŁs _/'_e st_darci error of trend e.au_.tioF, l_z X = e
the estimane _ bt + U_.
..
of
the
.03
log
f_J:
S 2 is S l d'[vi._d variable. Source
by
the
iogaritbm;
of
th_
l_,ean of
the
of basic da_a: Ce._tra! ._]ank Star_istical B_iletin; Central Bank Depa;'t_.eg,_ c,f Econo_,,ic Research.
quantities. • during
I_
••-•_
the
_.-he !ight?-o_
seven._i_$,
oDn£ribution.s
of
instability.
This
terms and
of
trade
it
the
is
constituent
pa_er
in
•more
to
closely
t-_rough
instability
t_; lock
commodities
looks
commodity
rise
wortn_.._hile
ins_abiiity
explores
shal:n
the
---4
Into
the
into
in
overall
export_
_ezomDosition
diversification
the
and
analysis
relatlon
%o
ins--.aDili_y.
DECOMPOSITION
;_ALYSIS
D_compo_
i'tion
fluctuations 1983;
by
X
and
indizes the
resDecti'_ aggregate approximated
(i) Vat(t)
Z
sz:m _
into
variances
vai4e
and
sl-_res.-
commodity by
Z Of
2
-- Z(w. 2 t z i {
2
variances
X and. Y_ their
Procter,
variance
plus
the
tP,e
of
covariance
variance of When
commodity
of
X and the
Z is
Z
is
Y minus
aggregate
co_.stitu.c_-p._._--.,
are
weighted
Dy
the
Fer_ example,
the
varianc_
of
tb-_
zrade
) var(t z
e_-_d Y
X/'V•, the
L!._'0:dand
-
x
the
and
conside&"
ccveriahce
term. _ of
(see
= X.Y,
=
betweeD
decomposed
commodity
.Given
Given
cova.ria_ce
are
(see.. e.g., Lloyd
variance
.Jy the _'
apc_oximate_ _he
the Y.
-i_'_stability usually,
a trend
t 19_3).
ap_roximate_
twice
- _ _ __-of an_y._
areund
Bautista
between
OF INST._ugIL!_Y
Pzocter,
) i
(L) around
a
_rend
can
be
19_3): -2 w,w. _-
_ ( _ i ) :_v(ti, " J i_j t.t. ?_ 3
t.) 2
Table
3.
Correlation Export
Matrix
Price
to
of
Residuals
Overall
from
It.port
Price
Trend
of the
Commodity
Ratios.
l
."
Abaca
Copra
Abaca
1.000
Copra
.411
1.000
Cocooil
.461
.975
D_sicoco
.105
.843
Copra cake
.086
.455
Cocooil
il
De sicoco
Come_ a
Sugar
Ccpcon
Pwood
Logs
Lumber
1.000 i
.827
1.000
_456
.377
%.000
-.401
-.324
-.494
-.600
.385
.349
.176
,.302
.1_9
_a]/ r
Sugar
.450
CopCon
.482
Plywood
.306
Logs
-.005
Lumber
-.359
.385 .196
.364 ..091
.459 .621 .296
-.051 .144 .544 .452
1.000 .041
1.000
.636
.161
.520 _771
.041 -.014
1.000 .524 .707
1.000 .59_
T.O00
Table
4.
Decomposition
of
the
va_-iance
cJf the
Commodity
Pezcentage (1972) ValL1e Weigl_ts
COf@iOD]TY
Variance Cc_s_d{ty Price
Independent
Re].ative
Term_
I_ Abaca
.0162
,00166
.076
2. Cocc<_il
.0908
.00309
4.460
Abaca
Terms
Contribution
Ce£_o - Cop n_t Con
of":rade
of
(£) by
Co_._o_ity
Covariance Tel:ms Copr_ Comec:a Desicoco
Comvodity
Group logs
to
Group.
V6:riance
Lu_,l_r
_, _lywoc_.] _dgaz i , J_ '
Oil -
.268
.268
-
of t
.687
.242
3 .920
4.392
-.004 . _88
SUM
'
.013
-.005
.018
.032
1.039
2.289
.719
2.573
.0,|0
. }53
_6._E7
5.966
a i
3. CopCon
.2202
.00284
24. 108
.68?
3.9_0
-
4,342
4, Copra
.0880
.00336
4.555
.242
4.392
4.342
-
Copra Mea I & Cake .0160
' .00077
6.
Desicoco
.e,202
.00237
7.
Logs
.2t02
.00]58.
8.
Lumber
.0180
.00,963
9.
Ply_od
.0300
.00096
Sugar
.2908
.00491
-.0!8
.420
-.648
.014
.347
,56C
9.624
.19{}
.738
2.720
,083
.250
-
.029
.347
.016
.011
-.97L3
.855
.023
.073
--1.755
.384
.696
-|4.874
.052
-1,228
-. 5':_8
-2.077
-.463
--7.?06-_5.Z_I
r .a& 0
5.
#0.
h
.034
-.004
,169
.013
12.221
-.018
. T90
,719
,420
.738
.029
-.006
2.573
-.648
2.720
.347
.855
,036
.018
.040
o014
.083
.016
.023
.384
.151
.032
.153
.347
.250
.011
.@73
.696
72.68_
188
1.039-6.287
-
-
-
.052
-
.560-7.706-.978-1.758-14.874-1.228-2.077
-
-0.219 I. 1_2 -7,953
-33.3£,9
t
Total
:,
1.000
-_T_8.499 --_
....
2.289
5.966
&.-- .......................................................
9.624
5,25T
-.2_9
1.112
-7.953
"-.598
-.463
-33"309
-18.3fI0
{except
possibly
sugge._ts
is
factors
for
_r._'_t_the
affect
in@
syn(hronized째 case
ef
copra that
tire
the
in
and
of
may
differences
c_._conut
by-products
important
exporter)
from
demand
prGducts
w_re
particularly sugar
factors
the
%,'hat this
specific
vis-a-vis
pattern
(which differ
export
suppiy
the
oil),
the
suggest_
oil in
that
of
the
also
coconut
seDse
coconut
m_v__ments
e_ch
This
)umber,
copra_ard
of
supply
of
also
is
sugar
the
loq.s and cpera-
responses
Philippines those
in
or
were
not
Of
t_,e most
or
log_s and
1 _mbe r. The of
results
trade
in Table
_,clividua/
_xplain
trade.
Table
4
for
commodity
terms
percent.
For
voia_iie
pric_.s
show_
that 40
of trade
sugar,it
export
decomposition
that
is
the
of
percen_
the
the
in
combi_%d
vaz_ation
!97G-_974) high
sugar
expo2Ts
$2; the variability latter is .07, which other band, the international 6.3 percent
duzing
!965-_982.
of the fozmer is more than trRnd annua_
sugar price was for the Philzpp_ne
50
is ._4@ percent grc%th
of
and
Jn
having the o_
the the of
prices
another of
contributior_
It may be noted that the i_ternaticnal more unstabJe than the ex_,.-.rt v,nit
Philippine
sugax
results
terms
terms
cop r_.r contzibured
The
t_e
among
commodity
tions
of
shar =_ 'durigg prices."
interaction
the
fiuctua,
whi_
of
bot._%- tl_.e variation
and
v_riation
around
export
commodity
indicate
the
accounted
]_rgest
4
commodity
p_ices
was
of the
the 34 the most
copper
pric_ of sugar valu_ index of As
measured
Dy
and that of the low_r째 On the rate of the
13.7 percent as sugar export
cempa_ed to _it value
resulted tive _s to
from
interactionsthe the
_hird
largex_ex._r with
largast
variation
relatively negative
commodities contribute
appears
meal/cake,
all
ether
the
had
around
_he to
therefore
the
<_eight
a
of
and
iDmber, price
variation
th-=t
one
a
variability
of
the
commodity
vis-a-vis the
three
did terms
effects
government inter%.ention {n sug_.r _rading during the ties is the reductlon in the instabiliKy of the sugar facing the producers aÂŁ the expense of a lower trend r_te.
12
of
substantial
plywood
of %he
which
because
especially
and
posi-
ccntri_u_ion
trade,
trend
the
Loqs,
negligible
movements
least
and
c.D_:modities.
terms
of price
wi_h at
-_ "share
share,
prices
correlation Copra
t_e
in
stable
sugar.
It
the
of
not of
the
sevenprices grow nh
COMMODITY
DI VERS IF !CAT ION
The to
implications
commodity
_n
export
earnings
a
a
and
already. the
growth
copra were
viable
of policy
and
and
reduce
of
the
this
is
lower and
of
the
minus
and
the
growth-rates
in
two the
desiccated
occurred
lumber
19_5-_982
of
percent
as
trend
for
the
annual volume
rates
for
copper,
logs
and
lumber
expansion,
constraints;
the
has
The
growth
of
to
4.6
oil.
Abaca
export
the
logs
during
2.1 percent
plywood.
sources
trend
uhan
from
rate
rest
oil,
shift
coconut of
Among
the
coconut
was
period
instability
trade.
to
a s:hift
growth
for
essentially
diverzificatioP.
to
exports
supply
neg3tive
to
sugar
extent
annual
by-products, not
tared
some
percent
during
exports
pertains
_erms
copra
meal/cake
trend
11.2
rate
order
from
from
of copra to
su@ar
away
To
volume
compared
of
copra
The
in
2
products,-commodity
shift
plywood.
_li_
commodity
movement
commodities,
and
and
export
requires
trade
diversification
principal
coconut,
for
partly
because
commodities
regis-
volume
of
exports,
i
along
with It
can
direction tion
copra be
during"
1965-1982
argued
however
of commodity
among
and
resource
make
them
d_versification
the principal
ezpo_
constraints less
viable
that-the
or as
more is
not
commodities
unfavorable
sources
13
of
world vigorous
realistic a
realloca-
(because
policy
demand
trends
export
growth)
but
rather
a
shill
to
o:her
mgricu!,t_ral
and
reso_:rce-based
Q
export
commo_Tq___es
heterogeneity of it
constructin
is
instability
of
presumably
the
ey.plored
to
resource
the
principal
trend
of
the
other
the
"mnst_le,
of
of
the
fast
of
pines.
that
Of
already
the
an
growing
tobacco.
The
stage
for
which
is
ÂŁhe
currently
appear
tc
the
(although
What
can
be
agricultural
included
i_
to
among
raise
a_ tlne same
earnings.
This
commodities with
the time
would
with
unstable opposite
a
of
ra_es
low
prices, those
of
/_terest
coffee,
still
developed
14
to
n_cke!,
the
of
Philip-
the
_hrimps,
is and
i._.p_.rr, suhstltution
except in
number
t_.e Philip, Dines
it; _he
commodities
and'variability
selected
_eiected_
is ÂŁhe
of
be
banana_
being
on
Philippines.
while
gro%_tn
prices
of
_rade
not
_be
growing
trend
Philippines rest
comparable
commodities.
_he
of
the
to
pric =_ movements
14 commodities
exporter
of
commodities
_ith
international
commodities
of
are
tt_e
fast
therefore
decrease).
earnings of
of
impact
diversification
growing
5 present_
termz
which
exports
instability a mix
the
diversification
expcrt
commodities
Table
_s
commod_cies
fast
and
and
Because
and
explore
would
commodity
mean
instability,
to
earnings
extent
and
appropriate
instability
rate
presuraably
9
traditional
growth
products
possible
export
based
aim
reducing
not
some
and
The
te_ manufactures.
of_mar.ufactu_-ed
difficulty indices,
and
far
palm
oil
co:,,n.__ry primarily
Table
5.
Trend a_ Prices,
CO_MOD
_T Y
_:_ta_z_/ cf!,int:._r-_atlona I Commodity Sei:,-_ _=__.=_Comr:c_i-.ie_, iQ65-lga2.,
TREND
EAYE a (%)
IXSTAB
ILITY b
O, G2 !5
I.
Banana
2.
Cacao
3
coffee
_ -_
c_ 0_i
4.
Maize
6.02
G.G41_9
5.
Nickel
9 ....
0. r__9
6.
_mlm
3,65
.9.i373
7.
Black
5.4S
0.0522
£,
Rice
6.36
D. 0729
9.
Rubber
7. i5
0. 0561
10.
6_ 30 i _.99
Oil Pepper
Shr imj-_
'_-I, S_sal
11.91
0.0271
" 14. O _
0. I IS2 0. 043_
12.
Sorgh_n
7.34
13.
Soybeans
7.02
14.
Tobac--_
5.66
Ave ra ge
is
any
to
f_om
variable.
b Measured l_
The by
logarithm
Not
snatisticaliy value
an
OiS
values
_d_,eratio
the
This
,
of
the
0.0491 0. O 1H7 'O.0596
7.67 * *
a Calculated X
_. 0763
e_._ti/_te of give_: cf
mean
the value
InX
= a+b
Time
ab';ve are
equal
to
standard o6
th:
_r_cr
of
where
b mul_iplied t,_.ere_res_ ¢-
variable.
szgnificant.
assu_Des
a
zere
15
grx)wt5
rate
_or
p-altooil.
for. export.
T_
a:;er._--_-ge nr_._n'.: growth
rate
of
the
innerna-
f
tional
>_icas
copra,
coconut
abaca)
is
nearly
commodities
as
exports rice,
Of
commodity
non
as
the
of
mean
for
exports
the
sugar',
fa%_
to
the
for
and
Thus
commediti
Furthermore;
tre_-_d, the improve
the
the
_: _ diver-
_= '._-._ 'isted
in .
m_,il/ppine .....
given
export
14
f_rcbabl, e
expert
i.mpJ_-:_ve_P.'eoverall
trend.
and
_,,.,,_,--: "-'.... _ calm
cofie_.
the
aggre-
diversification
secular
trend
ef
the
trade.
_,qe mean me_su:__---,_",,_._ice tional
gro-,th
in T-_bi=c 5. run
price
(i.e.,
su'.bset r-_factu._i
cacao,
appreciably
terms
nhe
__Dr._D '_e_a''a.b ;'': pric_
exports
ioc_.__a_-id _._,.._" ..... _: piywcJod,
tobacco)
import
also
commodity
to
medium
not
export
_4erall
would
well
Ln the
5 would
gate
equal
and
traditio_.al
copper,
ba_,o.na,
s_rimps,
Table
ma2or
oil,
(i _.,
sification
the
.during
_965-1982
14 commodities
i.nstability is
0,0661
in 'Pabi,_ 5.
as
This
_._e tradi_n
of
against
seems
0.0596
t._ sugg:ast t
that
expor_
tie_
would
OyeZ,
_he
'the
extent
commodity reduce overall ef
diverai.ficar_ion overall export
coD.cordance
export price of
toward
price instablii_y
the
16
price
_ne
ln-.; " -taw__ also
14
commodi-
a. "__ u'/. _,
HOw-
depends
on
'.'_.ovementG of
the
"-,arious commodit_._?i_._ duals
from
during
trend
o.f- the
_965~!982
instances
T_%e :.'¢;i-_elatlc-n [_.atrlx ,_',f the
are
of high
given
Phil_ppin_
among
]4
certain dities price
commodities
table
the
would
reduce
the
the
"fhus toward
instability
of
many major
i4 commodities
themselves.
diversification
snows
between
e_tpozts-an_,
export
to
of
offer
the
For
topp!r,§:
nickel
e._ports
Nonoc
Island
price
out
it
and is
not
__he ]4 commo-
the
overall
export
(now
that
medium
run,
:_ine,
there
be sold
th._ world
market
improving
rice
the
reqion s_cu!ariy
mean
_hat
drop.
%he
ma3or
in
ezport in
short
_,_ediu_
export)
could
much
so
be
costs.
exportation
£s
that
Philippine
demand
for
rice
discount.
rice
c.f th_ oi_
' while
rice
prospects
fo:
the
rice
production
world
by
expo;table
an a gr_at
i._
,"-r_.,sFec_
run
induced
Dower
not
volum£
the
Phili_._,ine
part
rai_ed
Philippine
?robiems
more,
exports
The
s_,ar_iy
so
in
5_o
_,>_t.he 9,rod_,c.t:icn_,roL,/e_s
Dy q,n&lity in
a
in Table
growth
Phi!ippin_
al.xc_dy.
(SL,ricao)
e_pected
listed
vigorous
is hampered
which
the
Of
banana
increases be
of
_hare
e_.ample,
probably
commodities
prospects
suDstantial
run.
in
6". The
prices
index,
seem
can
cgm:_odity
co_re!ation
that
A number
and
in Table
positive
traditional the
international
res_-
iI
surpiu., hampere_ can
onll
Further in
the
export_
AsiaJ wil
"
_
"
!"i' ................ o° o "'--" ........
.:_ana _cao _cooi I Cbffee 'Copper _(3opt_ .Logs g_ize Nickel l_a_i I Fcpper Black Plywood Rice Rubber $i,sal _r inl_ sor_hmt 5oybcr-ns SuFar 'Tobacco
l. 000
r
_
(K_CC'I L
O_'FEE
o
0.051 O. 103 0.694 O. l 12 0.627
l.000 O. 176 0.089 0.2'.,5 0. 163
I. 000 0,57_ 0.793 0.204
0.606 0.509 0.856 0.378 0.478 0.t¢71 0.318 0.660 0,_56 0.033 -0.049 0.86_ 0.630 0.750 -0.102
0.050 0.534 0.069 0.170 0,032 0.107 0.04I 0.097 0.597 0.061 , O. 1,50 0.0_9 -0.072 0.326 0.691
0.613 t 0.297 0.233 -0.069 0.567 0.679 0.327 0.396 0.555 • -0.255 0,36.,8 0.130 0._51 O.Ol[ 0.020
(CPPER
_,
lfGS
rvekI2E
NICirLEL
l.O00 0,060 0.230 0.3.53 C. 16_;4 0.671 0._60 O, 8_0 O.I?,I
1.000 0.369 0,587 0.530 0,3E8 0.7_6 0.076 0.293
t.OOO 0c3_ 0.269 0.003 0.02,_ 0.121 -0.278
0.090 0.9.99 0.785 O. 71_l -0.t52
-0.052 0.382 O. iOD 0.,526 -0.255
o,o--oo° [.000 0.40.9 0.665
l .000 0. 107
0.990 0.678 0.610 0.018 '0.609 0.503 0:576 0.696 0.665 0.t62
0.032 0.300 0,206 0.295 0,767 0.763 0.203 0.132 0.504 -0,t_97
0.6B9 0.775 0.522 0.20_ 0.373 O.13i 0.80I 0.._85 0.746 0.207
0.0_7 0.609 0.6_4 0.329 -0.022
0.36.9 O.13t_ 0.t_82 0.I30 -0.298
0.093 0.628 O. 512 0.3,55 0. i66
I.O00 l.O00 0.603 0.5)'3 -0,028 0.607 0.533 0.6(,3 0.6gl 0.710 0.157 0.093 O. _',82 0.6_0 0.283 0.032 o
0,272 0.562 O._J_6 0.115 0.29l
:,.Tabl e
6.
Co_t.
',::
PMOIL
I=,: i;lack _:i
!
=-"
PEPPER
PHOOD
RICE
RUBBER
SISAL
SIIRIMP
1. 000 O, 520 0.641 O. 076
I .000 0,529 0,219
"_,000 0 .007
1.000
0.302 0,514
0,155 0 _ 34,g
!.000 0.028
0.554 0.081 0.263
0.214 0,042 0,329
0.290 -0. 148 -0.051
SORGHUM
SOYBEANS
SUGAR
TOBACCO
1.ooo 0,675 0.374 0,515 0.505 -0,470
1.000 0,062 0,286 0,412 -0,097
0,009 0,520
0.269 0,374
0,655 0.551 -0.429
0,565 0,3F,.8 -0.3:20
0,152 O. 5", _, 0.617 0.163 0.024
-0.134 0.813 0.659 0,559 0.096
J
I. (20G 0.768 0.749 -0.119
, 1.000 0.530 -0.335
/ ' Jt 1' 000 -0.527
i .......................
L. ..........
_"---'r',--4
is the corr_lati_,n m._trim Clf the residuals from loglir, ear Lm_ic_s dqring 1965-1932. l._ata on .i:_terilo_iongl •[,:riceindices
trend of international from I_':FInte£national
,Jnancial
estimates.
Statistics
1983
Yc:%r.
The
Jcg._._nenx tre_:d
Js an
OL$
price
"_""P'
1,000
On
the
commodity Table
and the
it
appears
d/versifiCation
5 would
of, of
whole,
not
Would
not
country's
1965-1982.
have
agricultural
trend
and
products
and
terms
and
export
of trade
in
trade
improve the
near
in
trend
instability during
diversification
of the
growth
the of
export
listed
the
terms
appreciably
variability
an
commodities
reduced
earnings the
that
improved
appreciably
would
relative
the
appreciably
export
other
earnings
toward
have
Neither
therefore
to the
country's
the
growth export
future.
CONCLUSION
The the
anal_is
export
beyond
indicates
earnings
Philippine
and
that
terms
control.
much
of
of
trade
the
during
Furthermore,
an
instability 1965"1982
of was
export
commodity
mineral
commodi-
'[
diversification ties and
would terms
to
not of
squarely
terms
trade
the
picture the
blamed
of trade Philippines
agricultural
have. appreciably
Nonetheless, be
other
1983
improved
during
the
Philippine.
on ex6_enously
instability. had
lower
and
For
as
20
overall
period.
,
payments
crisis
influenced
Table
instabili._y
the
7 below of
expo_'t
export
cannot
export
and
indicates, earnings
Table
7.
Export Earninqs InstaDility :
and Commddity Terms of Trade Cauntrles (1965-1982). Seiec_ed _
.i
PDi lippines
COM_-!ODITY T _P_MS OF _RADE
#__k_ ;._.,= .....
EXPORT
0.0370
0.03 _4
-0.0719
0. 0282
Malaysia
O. 0432
0. 024_
Thaii__nd
0. 044 !
0. 0293
South
0.0474
0.0432
Indonesia
Korea
Note:
than
The measure of instability is r/_.e ratiG of the standard error of t_ regresaion t._ the !ogarith_.. of the mean value of the variable.
Indonesia,
1965-1982.
Furthermore,
the Philippines it
was
higher
Thailand. payments not
be
economic
MalaysÂąa
Since crises, the
was
, Thai!_.nd, the
terms
t_n
that
lower
than the e_Dort
determinlnq
those
of
other and
an._ South of
Korea,
Indonesia,
terms for
crisis.
21
dÂąd
of.trade
durinq
instability
of South
.countries
factor
trade
Korea
althouqb
Mal'ay51a, not
and
experience
instability
the-current
in
can
Philippine
REFE_--_NCES
Bau_istu, The
R. 1983 _ Instability PhLlippine Case, Paper
Seminar
Series.
in Food presented
and L_.port Incomes: at the CDEM, UPLB
mimeographed.
Branson, W. and Papaefstra%iou, L. _978. Income instability, Terms of Trade and the C_hcice of Exchange Rate Regime. Center Discussion Paper No. 277. Economic Growth Center, Yale University. Intal,
P., ]9S3. Three Sector. Unpublished sity.
Essays on the PhÂŁ1ippine External Ph.D. Dissertation, Yale Univer-
Lloyd;
F. J. add Procter, R. L., 1983. "Commodity sition of ExDort-Im _ort Instability," Journal loDment Ecenomics, Vol _2, pp. 41-57.
22
Decompoef Deve-