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Title: | Trade policy inconsistency and maize price volatility: an ARCH approach in Kenya |
Authors: | Maître d'Hôtel, Élodie Le Cotty, Tristan Jayne, Thom |
Year: | 2013 |
Periodical: | African Development Review (ISSN 1467-8268) |
Volume: | 25 |
Issue: | 4 |
Pages: | 607-620 |
Language: | English |
Geographic term: | Kenya |
Subjects: | food prices price policy tariff policy |
External link: | https://onlinelibrary.wiley.com/doi/10.1111/1467-8268.12055/pdf |
Abstract: | The 2007-2008 food crisis and current food price swings led economists to re-evaluate the potential for policy instruments to manage food price volatility, including tariff policy. The use of tariffs in importing countries to stabilize prices is theoretically not recommended because of its domestic and international costs but in practice many countries use import tariffs with the intention to stabilize their domestic prices. Among them, some achieve price stabilization, some do not. The authors address the reason why it sometimes works, and sometimes not. In the context of Kenya, they show that while domestic price levels are mainly explained by seasonal cycles and international prices, domestic price volatility is mainly explained by inconsistent moves of trade policy. Thus, the ability of a policy regime to lower food price volatility does not depend on the nature of the policy instrument only, but also on the ability to implement it. The authors define a consistent policy adjustment as a tariff decrease when world price increases and a tariff increase when world price is decreasing. They use an autoregressive conditionally heteroscedastic model of price determination in which prices and prices volatility are jointly estimated, using monthly data over the 1994-2009 period in Kenya. Bibliogr., notes, ref., sum. [Journal abstract] |