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Multiple‐Regime Spatial Price Transmission with an Application to Maize Markets in Southern Africa
Author(s) -
Myers Robert J.,
Jayne T.S.
Publication year - 2012
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1093/ajae/aar123
Subject(s) - economics , transmission (telecommunications) , magnitude (astronomy) , government (linguistics) , econometrics , monetary economics , computer science , telecommunications , linguistics , philosophy , physics , astronomy
Conventional threshold models of price transmission allow for different speeds of adjustment to equilibria depending on the magnitude of price differentials between markets. However, these models typically assume only one underlying long‐run equilibrium price relationship. In this article we develop a framework for allowing multiple equilibria and multiple speeds of adjustment with regime separation depending on the magnitude of trade flows between regions, rather than the magnitude of price differentials. Applying this framework to maize price transmission between South Africa and Zambia shows no transmission during periods of high imports, when the government was heavily involved in maize importation, but stronger transmission during periods of low imports when the government was not importing.