Spatial price transmission under different policy regimes : a case of maize markets in Kenya

Abstract

Kenya, like most countries in the Eastern and Southern Africa region, has continued to be overwhelmed by high and volatile food prices. In an effort to mitigate this problem, the government has implemented various trade and marketing policy instruments. The aim of this study is to examine whether the policies implemented have achieved their desired effects. The results of the study demonstrate a significant difference across the different policy regimes. Higher price transmission and faster dissipation of price shocks are observed under the regime with minimal or no policy interventions. Under policy regimes implemented to mitigate against high food prices, the reverse is true. Policies implemented to mitigate against price hikes resulted in market distortion. For these policies to achieve their desired effects, there is a need for proper consultation and coordination between government institutions, a review of the import ban on GMO foodstuffs, and distribution of the subsidised fertiliser through the private sector.