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Bangladesh rice trade and price stabilization: Implications of the 2007/08 experience for public stocks

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  • Dorosh, Paul A.
  • Rashid, Shahidur

Abstract

The extent to which Bangladesh should rely on imports for rice price stabilization is a contentious policy issue. This issue was underscored in the wake of the 2007–08 world food crisis, during which international rice prices skyrocketed and rice import supplies from India were disrupted. For more than a dozen years, from 1994 to 2007, private-sector rice imports made a major contribution to price stabilization and food security in Bangladesh, adding to domestic supplies following production shortfalls. In particular, following massive floods in 1998, private-sector imports sourced from wholesale rice markets in India contributed more than 2 million tons to rice supply in Bangladesh. Subsequently, between 2003 and mid-2007, Bangladesh prices were particularly stable. This paper presents econometric evidence that trade with India was a determining factor in this price stability. In particular, the authors show that in this period, Bangladesh domestic wholesale prices were co-integrated with import parity prices of subsidized below-poverty-line rice from India’s public stocks. Import flows in these years generated an estimated total of 1.0 to 1.6 billion US dollars in consumer surplus for Bangladesh households but reduced producer surplus by a similar amount.

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Bibliographic Info

Paper provided by International Food Policy Research Institute (IFPRI) in its series IFPRI discussion papers with number 1209.

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Date of creation: 2012
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Handle: RePEc:fpr:ifprid:1209

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Keywords: Price stabilization; International trade; Rice Bangladesh; Rice trade;

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  1. Headey, Derek & Fan, Shenggen, 2008. "Anatomy of a crisis: The causes and consequences of surging food prices," IFPRI discussion papers 831, International Food Policy Research Institute (IFPRI).
  2. Rashid, Shahidur & Gulati, Ashok & Cummings, Ralph Jr., 2008. "From parastatals to private trade: Lessons from Asian agriculture," Issue briefs 50, International Food Policy Research Institute (IFPRI).
  3. Ahmed, Nazneen & Bakht, Zaid & Dorosh, Paul A. & Shahabuddin, Quazi, 2007. "Distortions to Agricultural Incentives in Bangladesh," Agricultural Distortions Working Paper 48481, World Bank.
  4. Dorosh, Paul A., 2001. "Trade Liberalization and National Food Security: Rice Trade between Bangladesh and India," World Development, Elsevier, vol. 29(4), pages 673-689, April.
  5. Anderson, Kym & Martin, William J., 2007. "Distortions to Agricultural Incentives in Asia," Agricultural Distortions Working Paper 48557, World Bank.
  6. Rashid, Shahidur & Cummings Jr., Ralph & Gulati, Ashok, 2007. "Grain Marketing Parastatals in Asia: Results from Six Case Studies," World Development, Elsevier, vol. 35(11), pages 1872-1888, November.
  7. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  8. Boswijk, Peter & Franses, Philip Hans, 1992. "Dynamic Specification and Cointegration," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 369-81, August.
  9. Rashid, Shahidur & Gulati, Ashok & Cummings, Ralph Jr. (ed.), 2008. "From parastatals to private trade: Lessons from Asian agriculture," IFPRI books, International Food Policy Research Institute (IFPRI), number 978-0-8018-8815-1.
  10. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
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