The Impacts of Trade Barriers and Market Interventions on Maize Price Predictability: Evidence from Eastern and Southern Africa

December 1, 2009 - Author: Antony Chapoto and T.S. Jayne

IDWP 102. Antony Chapoto and T.S. Jayne. Michigan State University. 2009.The Impacts of Trade Barriers and Market Interventions on Maize Price Predictability: Evidence from Eastern and Southern Africa.

There is continuing debate in east and southern Africa about the effects of food market
reform on the welfare of small-scale farmers and low-income consumers. At the center of this
debate is the perception that food prices have become more unstable in countries that have
liberalized their staple food markets, thereby exacerbating the plight of poor consumers and
farmers. This perception has led many governments in the region to shun an open maize
borders policy and pursue a variety of food marketing and trade policy tools to stabilize food
prices. Unfortunately, there remains a dearth of empirical evidence on the effects of
alternative food marketing and trade policies, including that of liberalization, on price
stability and predictability. Assessments of this issue are complicated by the fact that market
reform programs are not monolithic in their design or implementation – impacts of reform on
price instability may depend on variations in implementation. It would be particularly
important to compare the magnitude of food price instability in countries that have embraced
relatively comprehensive staple food market reform policies over time versus those in which
the state continues to influence and stabilize food prices through the operations of marketing
boards and controls on trade.

This study examines the amplitude of price instability and unpredictability between countries
using trade barriers and marketing board operations to stabilize prices versus countries with
relatively open trade policies. Instability is defined as the unconditional variance in food
prices over time, whereas unpredictability is defined as the unanticipated component of price
instability, i.e., the conditional variance from a price forecast model.

Tags: cross-country, idwp

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Thomas Jayne

Thomas Jayne

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