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GTAP Resource #4489

"Agricultural Market Integration of China and its Implications for Food Security"
by Yang, Fan, Martina Brockmeier and Eddy Bekkers

China was pointed out to increase the world food price volatility during the 2007/08 for two reasons: its tremendous demand on agricultural products and export restraints on certain agricultural products including grains (Trostle, 2008). "Feeding China" is highlighted in recent OECD-FAO Agricultural Outlook in ensuring the global food security (OECD-FAO, 2013). Since joining the WTO, China has become unprecedentedly integrated into world agricultural market (Huang et al, 2009). While continues discussion has focused on the pressure of China on world food market, it is also important to see how changes of world food prices actually affect China. In this paper, we employ econometric analysis to study agricultural market integration of China by estimating co integration relations of food prices between international and domestic market, incorporate those results into a CGE framework and exam how it affects food security in China and other countries.

One important indicator for market integration is food price transmission. By collecting historical data (from 2003 to 2013) on world food price index, domestic food price index, exchange rates of Chinese Yuan against US Dollar, we calculate price transmission between world market and Chinese market for different agricultural products. Through unit root and cointegration test, we find cointegrated relations for prices of meat, dairy, oilseeds and sugar, but not for cereals. Econometric models (such as error correction model) are then adopted to estimation short- and long-run price dynamics and causality for each product group.

We then simulate imperfect market integration in a CGE framework, namely including incomplete price transmission estimated above in GTAP. Firstly, according to Valenzuela et al. (2007), we utilize the econometric estimation to adjust the price linkage equation between producer prices and world prices in GTAP for different food commodities in China,...

Resource Details (Export Citation) GTAP Keywords
Category: 2014 Conference Paper
Status: Published
By/In: Presented at the 17th Annual Conference on Global Economic Analysis, Dakar, Senegal
Date: 2014
Created: Yang, F. (4/15/2014)
Updated: Yang, F. (5/13/2014)
Visits: 2,551
- Food prices and food security
- Asia (East)

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