Abstract:
The impacts of market reforms on the volatility of agricultural prices in developing
countries have not been well understood because economic theory does not provide a
concrete basis for predicting the effects of reforms on the aggregate behavior of
economic agents. The absence of such information weakens microeconomic and
structural efforts to improve the efficiency of market institutions. This study investigates
whether agricultural reforms have exacerbated the degree of spatial volatility of maize
price in Tanzania. An Autoregressive Conditional Heteroskedasticity in Mean (ARCHM)
model is used to identify region-specific effects of the reforms on the volatility of
maize price. Results indicate that highly populated and developed regions might have
experienced less volatile prices than less populated and less developed regions. The
study recommends infrastructure development to link these types of regions to increase
the volume of trade between the regions thereby reducing the observed spatial volatility
in the long-run.
Description:
Selected Paper prepared for presentation at the American Agricultural Economics
Association annual meetings, Denver, Colorado, August 1-4, 2004.
