Estimating Policy Effects on Spatial Market Efficiency: An Extension to the Parity Bounds Model

Posted: 26 Jul 2007

See all articles by Asfaw Negassa

Asfaw Negassa

International Livestock Research Institute

Robert J. Myers

Michigan State University - Department of Agricultural Economics

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Abstract

The standard parity bounds model (PBM) is extended to allow for dynamic shifts in regime probabilities in response to changes in marketing policy. The approach allows estimation of the length of the adjustment period and a statistical test for no policy effects. The extended PBM is applied to maize and wheat markets in Ethiopia. Evidence of a dynamic adjustment path is found and grain marketing reforms are found to have improved spatial efficiency in a few markets, worsened it in a few others, but generally to have had little effect on the spatial efficiency of Ethiopian grain markets.

Suggested Citation

Negassa, Asfaw and Myers, Robert J., Estimating Policy Effects on Spatial Market Efficiency: An Extension to the Parity Bounds Model. American Journal of Agricultural Economics, Vol. 89, No. 2, pp. 338-352, May 2007, Available at SSRN: https://ssrn.com/abstract=1002743 or http://dx.doi.org/10.1111/j.1467-8276.2007.00979.x

Asfaw Negassa (Contact Author)

International Livestock Research Institute ( email )

P.O. Box 5689
Ababa
Kenya
+251-11-6463215 (Phone)

HOME PAGE: http://www.ilri.org/research/StaffProfile.asp?ID=257

Robert J. Myers

Michigan State University - Department of Agricultural Economics ( email )

East Lansing, MI 48824
United States
517-432-3649 (Phone)

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