An Economic Analysis of Commodity Export Revenue Variability in the South Pacific Island Nations

Abstract

This study focuses on the economic analysis of commodity export revenue variability (CERV) and related problems in selected South Pacific island nations (SPINs). The overall objective of this study was to conduct an empirical economic analysis of CERV in the selected SPINs, namely Fiji, PNG, SI and Vanuatu, all in Melanesia. Over the years, government authorities in the SPINs have taken the view that CERV is externally-induced and has affected deleteriously both the macro- and micro-level performance of their open economies. This view prompted the governments to establish commodity-specific price stabilisation schemes as a means of mitigating the deleterious effects of CERV. These schemes were created despite the lack of empirical evidence as to the causes and/or sources of CERV. In addition, evidence as to whether export growth, and hence export instability, caused economic growth and instability in Melanesia has been lacking. There was also little evidence about the factors affecting export sector performance, despite the importance of export sectors in these countries.