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Spatial equilibrium and price transmission between Southern African maize markets connected by informal trade

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  • Burke, William J.
  • Myers, Robert J.

Abstract

Policies regulating the international grain trade in Southern Africa (SA) are motivated by uncertainty regarding private sector performance and, in turn, private sector performance is generally constrained by the policy environment. We study spatial price transmission between SA maize markets where trade is dominated by informal product flows. This provides an opportunity to study private sector market performance in a largely unregulated market environment. Contrary to some existing evidence on the performance of SA grain markets connected by formal trade, we find that informally trading markets work quite well. Long-run price equilibrium is consistent with competitive trade, price transmission is rapid, and potential trade constraints have no disruptive impact on long-run relationships. Nevertheless, we do find evidence of occasionally high transfer costs that may impede informal trade flows. The conclusion is that a policy focus on encouraging informal trade and lowering informal trade costs would lead to improved market performance.

Suggested Citation

  • Burke, William J. & Myers, Robert J., 2014. "Spatial equilibrium and price transmission between Southern African maize markets connected by informal trade," Food Policy, Elsevier, vol. 49(P1), pages 59-70.
  • Handle: RePEc:eee:jfpoli:v:49:y:2014:i:p1:p:59-70
    DOI: 10.1016/j.foodpol.2014.05.008
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    References listed on IDEAS

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    Cited by:

    1. John Baffes & Varun Kshirsagar & Donald Mitchell, 2019. "What Drives Local Food Prices? Evidence from the Tanzanian Maize Market," World Bank Economic Review, World Bank Group, vol. 33(1), pages 160-184.
    2. Guillaume Pierre & Jonathan Kaminski, 2019. "Cross country maize market linkages in Africa: integration and price transmission across local and global markets," Agricultural Economics, International Association of Agricultural Economists, vol. 50(1), pages 79-90, January.
    3. Davids, T. & Meyer, F. & Westhoff, P., 2018. "Quantifying the regional impact of export controls in Southern African maize markets," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277353, International Association of Agricultural Economists.
    4. Aysoy, Cevriye & Kirli, Duygu Halim & Tumen, Semih, 2015. "How does a shorter supply chain affect pricing of fresh food? Evidence from a natural experiment," Food Policy, Elsevier, vol. 57(C), pages 104-113.
    5. Murali, P. & Sendhil, R. & Prathap, D. Puthira & Venkatasubrmanian, V. & Bakshi Ram, B.R., 2018. "Decontrolling, Price Transmission and Market Integration of Sugar Sector in India vis-a-vis Global market - A cointegration Analysis," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277212, International Association of Agricultural Economists.

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