HOW DID POLICY INTERVENTIONS IN WHEAT EXPORT MARKETS IN RUSSIA AND UKRAINE DURING THE FOOD CRISIS 2007/2008 INFLUENCE WORLD MARKET PRICE TRANSMISSION?
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This paper investigates the impacts of export controls in Russia and Ukraine on wheat world
market price transmission during the 2007/2008 global food crisis. Russia and Ukraine aimed
to reduce wheat exports induced by extraordinarily high world market prices to secure
sufficient wheat supply on the domestic markets. Utilizing a Markov-Switching vector error
correction model (MSVECM), we find that the temporary export restrictions induced negative
effects on wheat markets in Russia and Ukraine. Although instability increased on the world
markets itself, we have shown that the increase in the market instability was particularly
pronounced in Russia and Ukraine. Also, the export restrictions dampened price transmission
to the farmers’ prices, which pushed the growers’ prices below their long-run equilibrium
level. Thus, investment incentives in wheat production which could result from high world
market prices were foregone.