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Price Transmission in Conflict-Affected States: Evidence from Cereal Markets of Somalia

Justin V. Hastings, Sarah Phillips, David Ubilava () and Andrey Vasnev

No 2020-16, Working Papers from University of Sydney, School of Economics

Abstract: How integrated are agricultural markets in conflict-affected states? We answer this question by examining the dynamics of monthly price series of rice, maize, and sorghum across eleven cities (markets) of Somalia. Using conflict as a source of transaction costs between spatially connected markets, we examine its role in price transmission between the markets in a panel smooth transition regression framework. We find that in the case of rice—an imported cereal grain—conflict tends to mitigate the speed of price transmission between markets. By contrast, we find no evidence of conflict-related transaction costs in the case of maize and sorghum—commodities that are locally produced, particularly in the central and southern parts of Somalia. In all instances, we find that there is some degree of spatial integration among cereal markets around the country, perhaps partly due to informal institutions that can bridge the divides created by conflict, distance, and internal political fragmentation. These findings add crucial detail to the literature concerned with the role of commodity prices on poverty and food security in conflict-affected states.

Keywords: cereal prices, market integration; panel smooth transition regression; price transmission; Somalia (search for similar items in EconPapers)
Date: 2020-12
New Economics Papers: this item is included in nep-agr and nep-dev
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