A stochastic simulation of the impact of price insulation policies on world wheat market stability

Ramatu Mahama

ISU General Staff Papers from Iowa State University, Department of Economics

Abstract: A nonspatial wheat trade model is developed for wheat. Stochastic simulation of the model is performed to determine the impact of insulated wheat markets in India, and the European Community, on the stability of world wheat prices. The effect of production variability in the Soviet Union on the stability of the world wheat market is also examined;The research shows widespread price intervention in world wheat trade, with price transmissions between world and domestic markets limited to only the United States, Canada, and Australia. A 79 percent reduction in production variability in the U.S.S.R. lowers U.S. gulf port price uncertainty by 34 percent. A 56 percent reduction in E.C. price levels lowers E.C. production by 22 percent and increases U.S. net exports by 10.3 MMT. The gulf port price level rises by 13 percent; instability of this price falls by 13 percent, also. Therefore, higher price transmission between world and E.C. prices indeed lowers world price uncertainty;Setting the wheat price in India to its world price equivalent lowers India's demand more than it increases production, therefore, India becomes a net exporter. The effect is a fall in both U.S. net exports and gulf port price. Lagged price response in India's supply equation is the reason why perfect world price transmission into India raises wheat market instability within and outside India;The analyses suggest that the greater market stability argument for free trade may be exaggerated because theoretical models supporting the argument do not include lagged price response in the supply functions.

Date: 1985-01-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://dr.lib.iastate.edu/server/api/core/bitstre ... 1f64b0475d53/content
Our link check indicates that this URL is bad, the error code is: 403 Forbidden

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:isu:genstf:198501010800008868

Access Statistics for this paper

More papers in ISU General Staff Papers from Iowa State University, Department of Economics Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070. Contact information at EDIRC.
Bibliographic data for series maintained by Curtis Balmer ().