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Rice market integration and food security in Nepal: The role of cross-border trade with India

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  • Sanogo, Issa
  • Maliki Amadou, Mahamane

Abstract

Coarse rice market integration between Nepal and India is analyzed applying a threshold autoregressive model. The price response behaviour of traders is found to be consistent with an asymmetric price adjustment mechanism, indicating coarse rice prices in Nepal respond to shocks originating in India. The results show that adjustments to negative price deviations from long-run stable equilibrium are faster than adjustments to the positive ones given a null threshold. Given that trade flows mainly from India to Nepal, Nepali traders would adjust their prices upward to align with the long-run equilibrium value relatively more quickly in the case of negative price deviations, than if the price deviations were positive. Such a high speed of adjustment to negative price deviations could be detrimental to net food buyers' food security status in the absence of a price stabilization mechanism. However, a price stabilization policy in Nepal, a food deficit and import dependent country, would hardly have any effect on prices unless further effort is made to build up the level of national food reserves for short-term food security interventions. In the current context of structurally low levels of national food reserves, an alternative short-term policy such as foreign aid, in the form of food or income transfers, targeting the most vulnerable households to price increases is necessary through social safety net programmes. In the long-run, an improvement of transportation infrastructure between market hubs (other than the Biratnagar trade basin) in the Terai (Nepal) and India would contribute to the reduction of transaction costs and create incentives for more competition in formal cross-border trade with India. In times of negative shocks such as the high food price crisis in 2008, restrictive food trade policies in India will continue to undermine household food security in Nepal.

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Bibliographic Info

Article provided by Elsevier in its journal Food Policy.

Volume (Year): 35 (2010)
Issue (Month): 4 (August)
Pages: 312-322

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Handle: RePEc:eee:jfpoli:v:35:y:2010:i:4:p:312-322

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Web page: http://www.elsevier.com/locate/foodpol

Related research

Keywords: Cross-border trade Asymmetric price transmission Food security Nepal India;

References

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Citations

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Cited by:
  1. Alam, Mohammad Jahangir & McKenzie, Andrew M. & Buysse, Jeroen & Begum, Ismat Ara & Wailes, Eric J. & Van Huylenbroeck, Guido, 2012. "Measuring Market Integration in the Presence of Threshold Effect: The Case of Bangladesh Rice Markets," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124435, Agricultural and Applied Economics Association.
  2. Alam, Mohammad Jahangir & Begum, Ismat Ara, 2012. "World and Bangladesh Rice Market Integration: An Application of Threshold Cointegration and Threshold Vector Error Correction Model (TVECM)," 86th Annual Conference, April 16-18, 2012, Warwick University, Coventry, UK 135119, Agricultural Economics Society.
  3. Loening, Josef L., 2011. "Lao People’s Democratic Republic: responding to rice price inflation," MPRA Paper 33443, University Library of Munich, Germany.
  4. Ntsama, Mireille, 2012. "La relation de prix entre le Cameroun et le Gabon
    [Is there a food price transmission between Cameroon and Gabon?]
    ," MPRA Paper 53771, University Library of Munich, Germany, revised 03 May 2013.
  5. Chizari, Amir Hossein & Sani, Masoud Fehresti & Kalashami, Mohammad Kavoosi, 2013. "Investigating Market Integration and Price Transmission of Different Rice Qualities in Iran," International Journal of Agricultural Management and Development (IJAMAD), Iranian Association of Agricultural Economics, vol. 3(4), December.
  6. Sekhar, C.S.C., 2012. "Agricultural market integration in India: An analysis of select commodities," Food Policy, Elsevier, vol. 37(3), pages 309-322.

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