The impact of market reforms on spatial volatility of maize price in Tanzania
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Journal of Agricultural Economics
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Selected Paper prepared for presentation at the American Agricultural Economics
Association annual meetings, Denver, Colorado, August 1-4, 2004.
The impacts of market reforms on the volatility of agricultural prices in developing countries have not been well understood because economic theory does not provide a concrete basis for predicting the effects of reforms on the aggregate behavior of economic agents. The absence of such information weakens microeconomic and structural efforts to improve the efficiency of market institutions. This study investigates whether agricultural reforms have exacerbated the degree of spatial volatility of maize price in Tanzania. An Autoregressive Conditional Heteroskedasticity in Mean (ARCHM) model is used to identify region-specific effects of the reforms on the volatility of maize price. Results indicate that highly populated and developed regions might have experienced less volatile prices than less populated and less developed regions. The study recommends infrastructure development to link these types of regions to increase the volume of trade between the regions thereby reducing the observed spatial volatility in the long-run.
The impacts of market reforms on the volatility of agricultural prices in developing countries have not been well understood because economic theory does not provide a concrete basis for predicting the effects of reforms on the aggregate behavior of economic agents. The absence of such information weakens microeconomic and structural efforts to improve the efficiency of market institutions. This study investigates whether agricultural reforms have exacerbated the degree of spatial volatility of maize price in Tanzania. An Autoregressive Conditional Heteroskedasticity in Mean (ARCHM) model is used to identify region-specific effects of the reforms on the volatility of maize price. Results indicate that highly populated and developed regions might have experienced less volatile prices than less populated and less developed regions. The study recommends infrastructure development to link these types of regions to increase the volume of trade between the regions thereby reducing the observed spatial volatility in the long-run.
Keywords
Market reforms impact, Spatial volatility, Maize price, Agricultural prices, Tanzania