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A Stochastic Simulation Analysis Of The Effects Of Indian Wheat Production Instability On The World Wheat Market

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  • Devadoss, Stephen
  • Li, Shuangling
  • Jones, James

Abstract

Adverse weather factors in India augment the instability in wheat supply and trade. Consequently, India's wheat trade is a classic example of stochastic supply being the dominant factor in determining trade flows. This study analyses the effects of random fluctuations in India's wheat supply on domestic and world price variability and trade flows of India and major exporters and importers by using stochastic simulation analysis. Production instability causes price variability of $71 per metric ton under autarky condition. However, price variability is mitigated once trade is allowed. Thus, trade acts as a buffer stock program in reducing price variability. The results show that production shortfalls (surpluses) in India benefit wheat exporters (importers) and hurt importers (exporters).

Suggested Citation

  • Devadoss, Stephen & Li, Shuangling & Jones, James, 1994. "A Stochastic Simulation Analysis Of The Effects Of Indian Wheat Production Instability On The World Wheat Market," A.E. Research Series 305125, University of Idaho, Department of Agricultural Economics and Rural Sociology.
    • Handle: RePEc:ags:uidaer:305125
    DOI: 10.22004/ag.econ.305125
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    References listed on IDEAS

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    1. S. Devadoss & William H. Meyers, 1990. "Variability in wheat export demand elasticity: Policy implications," Agricultural Economics, International Association of Agricultural Economists, vol. 4(3-4), pages 381-394, December.
    2. Raymond Vernon, 1966. "International Investment and International Trade in the Product Cycle," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 80(2), pages 190-207.
    3. Blandford, David & Schwartz, Nancy E., 1983. "Is the variability of world wheat prices increasing?," Food Policy, Elsevier, vol. 8(4), pages 305-312, November.
    4. D. Gale Johnson, 1975. "World Agriculture, Commodity Policy, and Price Variability," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 57(5), pages 823-828.
    5. Devadoss, S. & Meyers, William H., 1990. "Variability in wheat export demand elasticity: policy implications," Agricultural Economics, Blackwell, vol. 4(3-4), pages 381-394, December.
    6. Devadoss, Stephen & Meyers, William H., 1990. "Variability in Wheat Export Demand Elasticity: Policy Implications," Staff General Research Papers Archive 316, Iowa State University, Department of Economics.
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    1. Devadoss, Stephen & Li, Shuangling & Jones, James, 1997. "A Stochastic simulation analysis of the effects of Indian wheat production instability on the world wheat market," Journal of Policy Modeling, Elsevier, vol. 19(4), pages 375-379, August.

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