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Working Paper

Maize Price Volatility : Does Market Remoteness Matter?

price decreases deficit price forecast price levels price increases stock global markets futures information system sales income transportation costs supplier exchange liquidity trend price spreads infrastructure development gasoline domestic price road infrastructure price market supply rural market international bank inflation market information oligopoly price variation travel costs wholesaler road commercialization costs transport population growth regional trade food price price volatility surplus products liquidity constraints supply shocks monopoly marketing markets agricultural prices competitive market price series product price behavior inventories gross domestic product negative shocks supply shock economic reform road quality commodity price liberalization negative shock food production infrastructure market price transaction initiatives data availability storage capacity deficit regions opportunity cost good travel transportation policies international trade volatility border crossing barriers agricultural price third world local market demand price risk demand function consumer price price level price changes price fluctuations price formation price effect local markets transaction costs market foreign exchange rural markets price increase deficit region roads crossing price shift regional integration economic development trade security growth rate transportation cost market equilibrium share poverty high transport supply purchasing fuel competitive framework market demand investments market integration consumer price index market reform price decrease wholesalers commodities price variations road conditions exchange rate suppliers excess supply food prices transport costs price index commodity prices travel time remote areas commodity prices cost of capital development bank storage

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World Bank Group, Washington, DC
Africa | Burkina Faso | Cote d'Ivoire | Ghana | Togo
2015-03-30T16:39:43Z | 2015-03-30T16:39:43Z | 2015-02

This paper addresses the role of market remoteness in explaining maize price volatility in Burkina Faso. A model of price formation is introduced to demonstrate formally that transport costs between urban and rural markets exacerbate maize price volatility. Empirical support is provided to the proposition by exploring an unusually rich data set of monthly maize price series across 28 markets over 2004-13. The methodology relies on an autoregressive conditional heteroskedasticity model to investigate the statistical effect of road quality and distance from urban consumption centers on maize price volatility. The analysis finds that maize price volatility is greatest in remote markets. The results also show that maize-surplus markets and markets bordering Côte d'Ivoire, Ghana and Togo have experienced more volatile prices than maize-deficit and non-bordering markets. The findings suggest that enhancing road infrastructure would strengthen the links between rural markets and major consumption centers, thereby also stabilizing maize prices.


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