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Price Transmission Subject to Security‐based Trade Barriers in the Context of the Israeli‐Palestinian Conflict

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  • Ihle, Rico
  • Rubin, Ofir D.

Abstract

Israel’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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Paper provided by International Association of Agricultural Economists in its series 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil with number 125392.

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Date of creation: Aug 2012
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Handle: RePEc:ags:iaae12:125392

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Keywords: 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;

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  4. Rico Ihle & Joseph Amikuzuno, 2010. "Assessing Seasonal Asymmetric Price Transmission in Ghanaian Tomato Markets With the Johansen Estimation Method," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 53, Courant Research Centre PEG.
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  8. Gloria Gonz�lez-Rivera & Steven M. Helfand, 2001. "The Extent, Pattern, and Degree of Market Integration: A Multivariate Approach for the Brazilian Rice Market," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(3), pages 576-592.
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Cited by:
  1. Rubin, Ofir D. & Ihle, Rico & Kachel, Yael & Goodwin, Barry K., 2013. "The impact of violent political conflict on commodity prices: The Israeli food market," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150961, Agricultural and Applied Economics Association.

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