Price Transmission Subject to Security‐based Trade Barriers in the Context of the Israeli‐Palestinian Conflict
AbstractIsrael’s imposition of military security measures in the Palestinian territories as a consequence of the long-lasting violent conflict yields depressing economic effects to all parties involved. One crucial implication is the limited ability to carry out trade which brings about welfare losses. This paper assesses the consequences of the Israeli-Palestinian conflict on price dynamics of agricultural trade between Israel and the West Bank by analyzing daily wholesale prices subject to movement restrictions. An exogenous regime switching cointegration model is estimated using a novel extension of the Johansen estimation method. We find Hebron and Tel Aviv wholesale markets to be integrated for the main trading products. Deviations from price equilibrium are quickly adjusted for. The model suggests that the movement restrictions temporarily cut off both markets from each other. Welfare implications of the closures depend on the direction of trade, harming both Palestinian and Israeli consumers.
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Bibliographic InfoPaper provided by International Association of Agricultural Economists in its series 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil with number 125392.
Date of creation: Aug 2012
Date of revision:
Agricultural trade; cointegration; exogenous regime-switching; Israel; Middle East; Palestinian territories; price transmission; violent conflict; Agricultural and Food Policy; Demand and Price Analysis; Food Security and Poverty; International Relations/Trade; C32; D74; Q11; Q13; F15;
Find related papers by JEL classification:
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances
- Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
- Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
- F15 - International Economics - - Trade - - - Economic Integration
This paper has been announced in the following NEP Reports:
- NEP-AGR-2012-07-08 (Agricultural Economics)
- NEP-ALL-2012-07-08 (All new papers)
- NEP-ARA-2012-07-08 (MENA - Middle East & North Africa)
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