Explaining grain and oilseed price volatility: The role of export restrictions

This study examines the impact that export restrictions have had on price volatility. Food price volatility causes planning problems for policy makers and is disruptive to the food supply chain. An increasingly common response to stabilizing domestic prices is to implement export restrictions. However, if the country is a large enough exporter, the restriction can exacerbate global price volatility. Using price data on maize, wheat, rice and soy, we estimate the effect of export taxes and quantitative restrictions - as well as other macroeconomic variables - on price volatility. First, we use a univariate structural time series approach to remove regularities such as cycles and trends to yield an estimate of filtered price volatilities. Second, we regress the estimated volatilities from the first stage on a set of explanatory variables using a generalized method of moments (GMM) approach. The results from the GMM regression show that export restrictions implemented between 2006 and 2011 increased price volatility for wheat and rice but not maize and soybean. Simulation results show that the contribution of export restrictions to price volatility is the same order of magnitude as key macroeconomic variables.