Assessing the impact of rice price stabilization policies in Bangladesh: Results from a stochastic spatial equilibrium model
Rice plays a central role in the diet in Bangladesh and as a source of income for farmers. Although Bangladesh has largely liberalized international trade in rice, it maintains a public food distribution system to stablize prices, distributing an average of 2 million tons of rice per year at a cost...
| Autores principales: | , , , , |
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| Formato: | Artículo preliminar |
| Lenguaje: | Inglés |
| Publicado: |
International Food Policy Research Institute
2024
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| Materias: | |
| Acceso en línea: | https://hdl.handle.net/10568/141799 |
| _version_ | 1855522575311962112 |
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| author | Minot, Nicholas Hossain, Shahadat Kabir, Razin Dorosh, Paul A. Rashid, Shahidur |
| author_browse | Dorosh, Paul A. Hossain, Shahadat Kabir, Razin Minot, Nicholas Rashid, Shahidur |
| author_facet | Minot, Nicholas Hossain, Shahadat Kabir, Razin Dorosh, Paul A. Rashid, Shahidur |
| author_sort | Minot, Nicholas |
| collection | Repository of Agricultural Research Outputs (CGSpace) |
| description | Rice plays a central role in the diet in Bangladesh and as a source of income for farmers. Although Bangladesh has largely liberalized international trade in rice, it maintains a public food distribution system to stablize prices, distributing an average of 2 million tons of rice per year at a cost of almost US$ 800 million per year. This study explores whether alternative policies could achieve similar stabilization at a lower cost. It uses a stochastic spatial-equilibrium model of rice markets to simulate monthly prices in eight regions of the country. Stochastic shocks are used to simulate fluctuations in regional production, replicating historical patterns at the region-season level, as well as inter-regional correlation in production shocks. It also simulates fluctuation in world rice prices, mimicking the mean, variance, and serial correlation of historical wholesale prices of rice in Delhi. Public procurement and distribution follow historic averages by month and region. Private storage is represented by a simplified version of rational expectations models, in which net storage is a non-linear function of availability in the previous month.
One set of simulations tests alternative levels of distribution, finding that cutting distribution to 1 million tons would have minimal effects on the level of rice price stability. Another set of simulations tested different import tariff levels, including the baseline rate of 25%1. We find that lower tariffs result in both lower rice prices and less price instability, as world rice prices tend to be more stable than local prices. Simulating a buffer stock with different price bands shows that a narrow band can achieve high price stability but at a high fiscal cost. A 20 T/kg (USD 0.26/kg) price band generates similar price stabilization at a lower cost compared to current policy. However, it is difficult to set the “right” purchase and sale price, and many simulations result in exhausting reserves or reaching warehouse capacity. An adaptive buffer stock, in which the price is adjusted as the stock runs too low or too high, solves some of these problems. In general, the study finds that current procurement and distribution patterns do not match well with the regional and monthly patterns of surplus and deficit, possibly reflecting multiple and conflicting goals of the public food distribution system. |
| format | Artículo preliminar |
| id | CGSpace141799 |
| institution | CGIAR Consortium |
| language | Inglés |
| publishDate | 2024 |
| publishDateRange | 2024 |
| publishDateSort | 2024 |
| publisher | International Food Policy Research Institute |
| publisherStr | International Food Policy Research Institute |
| record_format | dspace |
| spelling | CGSpace1417992025-11-06T05:57:15Z Assessing the impact of rice price stabilization policies in Bangladesh: Results from a stochastic spatial equilibrium model Minot, Nicholas Hossain, Shahadat Kabir, Razin Dorosh, Paul A. Rashid, Shahidur equilibrium price stabilization stochastic models rice tariffs Rice plays a central role in the diet in Bangladesh and as a source of income for farmers. Although Bangladesh has largely liberalized international trade in rice, it maintains a public food distribution system to stablize prices, distributing an average of 2 million tons of rice per year at a cost of almost US$ 800 million per year. This study explores whether alternative policies could achieve similar stabilization at a lower cost. It uses a stochastic spatial-equilibrium model of rice markets to simulate monthly prices in eight regions of the country. Stochastic shocks are used to simulate fluctuations in regional production, replicating historical patterns at the region-season level, as well as inter-regional correlation in production shocks. It also simulates fluctuation in world rice prices, mimicking the mean, variance, and serial correlation of historical wholesale prices of rice in Delhi. Public procurement and distribution follow historic averages by month and region. Private storage is represented by a simplified version of rational expectations models, in which net storage is a non-linear function of availability in the previous month. One set of simulations tests alternative levels of distribution, finding that cutting distribution to 1 million tons would have minimal effects on the level of rice price stability. Another set of simulations tested different import tariff levels, including the baseline rate of 25%1. We find that lower tariffs result in both lower rice prices and less price instability, as world rice prices tend to be more stable than local prices. Simulating a buffer stock with different price bands shows that a narrow band can achieve high price stability but at a high fiscal cost. A 20 T/kg (USD 0.26/kg) price band generates similar price stabilization at a lower cost compared to current policy. However, it is difficult to set the “right” purchase and sale price, and many simulations result in exhausting reserves or reaching warehouse capacity. An adaptive buffer stock, in which the price is adjusted as the stock runs too low or too high, solves some of these problems. In general, the study finds that current procurement and distribution patterns do not match well with the regional and monthly patterns of surplus and deficit, possibly reflecting multiple and conflicting goals of the public food distribution system. 2024-05-09 2024-05-09T19:04:47Z 2024-05-09T19:04:47Z Working Paper https://hdl.handle.net/10568/141799 en Open Access application/pdf International Food Policy Research Institute Minot, Nicholas; Hossain, Shahadat; Kabir, Razin; Dorosh, Paul A.; and Rashid, Shahidur. 2024. Assessing the impact of rice price stabilization policies in Bangladesh: Results from a stochastic spatial equilibrium model. IFPRI Discussion Paper 2252. Washington, DC: International Food Policy Research Institute. https://hdl.handle.net/10568/141799 |
| spellingShingle | equilibrium price stabilization stochastic models rice tariffs Minot, Nicholas Hossain, Shahadat Kabir, Razin Dorosh, Paul A. Rashid, Shahidur Assessing the impact of rice price stabilization policies in Bangladesh: Results from a stochastic spatial equilibrium model |
| title | Assessing the impact of rice price stabilization policies in Bangladesh: Results from a stochastic spatial equilibrium model |
| title_full | Assessing the impact of rice price stabilization policies in Bangladesh: Results from a stochastic spatial equilibrium model |
| title_fullStr | Assessing the impact of rice price stabilization policies in Bangladesh: Results from a stochastic spatial equilibrium model |
| title_full_unstemmed | Assessing the impact of rice price stabilization policies in Bangladesh: Results from a stochastic spatial equilibrium model |
| title_short | Assessing the impact of rice price stabilization policies in Bangladesh: Results from a stochastic spatial equilibrium model |
| title_sort | assessing the impact of rice price stabilization policies in bangladesh results from a stochastic spatial equilibrium model |
| topic | equilibrium price stabilization stochastic models rice tariffs |
| url | https://hdl.handle.net/10568/141799 |
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