Optimal Price Stabilization Policies for Staple Grains: The Case of Maize in Eastern and Sothern Africa

Christopher D. Gerrard and John Spriggs

No 198053, 1997 Occasional Paper Series No. 7 from International Association of Agricultural Economists

Abstract: In the context of (a) stability in domestic maize production, (b) a significant divergence between import and export parity prices for maize, and (c) random variability in world maize prices, Eastern and Southern African governments have for many years attempted to reduce the instability in domestic maize prices. However, governments face a trade-off between the fiscal costs of price stabilization and the degree of price variability allowed. This paper presents a dynamic stochastic simulation model that not only explores the nature of this trade-off, but also determines optimal government policies for domestic target prices and domestic target levels of stock in order to minimize the expected fiscal costs of maintaining given degrees of price stability.

Keywords: Crop Production/Industries; Demand and Price Analysis (search for similar items in EconPapers)
Pages: 10
Date: 1997
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Persistent link: https://EconPapers.repec.org/RePEc:ags:iaaeo7:198053

DOI: 10.22004/ag.econ.198053

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