buffer-stock method
Quick Summary
The buffer-stock method in economics is a strategy used to stabilize the market for a basic commodity. This approach involves acquiring a stock of the commodity during periods of low or unstable prices and then releasing it when prices are high.1
The goal is to maintain prices within a predetermined range, preventing extreme fluctuations. When the market price falls to a set floor, a buffer-stock agency buys the commodity, increasing demand and pushing prices up. Conversely, when the market price rises to a set ceiling, the agency sells from its stock, increasing supply and bringing prices down. This method is often combined with export controls to further manage market stability.2
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