TRADE POLICY CHANGE AND PRICE VOLATILITY SPILL-OVER IN A CUSTOMS UNION: A CASE STUDY OF LAMB TRADE BETWEEN NAMIBIA AND SOUTH AFRICA
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Namibia introduced the “Small Stock Marketing Scheme” (SSMS) in 2004 which replaced 15% export duty on live sheep exports to South Africa with progressively demanding quantitative restrictions. This policy increased price volatility in the Namibian sheep market. We used relevant monthly price data and employed EGARCH modeling to determine if price volatility spilled-over from the sheep market in Namibia to South African sheep market. About 71 percent of the volatility in the Namibian sheep market is transmitted to the retail market in South Africa and the transmitted volatility remains persistent.