Import/export parity price analysis
2008
This manual focuses on the role parity prices play in food security and early warning analysis. Parity prices are used to compare prices of a commodity in two different locations, when the two locations are in different countries. This guide provides practical guidance on what import and export parity prices are and how they are used to assess incentives to trade as well as incentives to produce where local producers are in competition with producers and suppliers from outside the country.It highlights the data needed and the tools used for calculating the parity price and how it can be applied to food security analysis and early warning.<br /><br />The document gives examples of how the Famine Early Warning System Network (FEWSNET) has used parity prices in Malawi, Thailand, Mali, South Africa, Mozambique and Somalia to detect early food shortages and impact on cross border trade. It also outlines a number of potential applications of parity pricing, which include:<br /> measures the incentives or disincentives for agricultural production given competition from international trade and/or cross border flows measures the incentives or disincentives for moving commodities from one location to another, specifically across borders can help detect unfair commodity pricing can be analysed over time to assess the dynamics of food security in a given location. The manual concludes that parity price analysis provides a tool to compare prices in different locations to derive meaningful economic and social interpretation of those differences as well as helping in answering typical and very important food security and early warning questions in a country.
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