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Estimating Policy Effects on Spatial Market Efficiency: An Extension to the Parity Bounds Model
Author(s) -
Negassa Asfaw,
Myers Robert J.
Publication year - 2007
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 - 10.1111/j.1467-8276.2007.00979.x
Subject(s) - economics , parity (physics) , econometrics , extension (predicate logic) , spatial dependence , path (computing) , agricultural economics , mathematics , statistics , computer science , physics , particle physics , programming language
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.