Intervention Models Applied to Evaluate Impacts of ...
Transcript of Intervention Models Applied to Evaluate Impacts of ...
Intervention Models Applied to Evaluate Impacts of Sanitary and
Technical Barriers to Trade
Sílvia H. G. de MirandaGeraldo S.A. de C. Barros
ESALQ – University of Sao Paulo
2- 5th December 2006Winter Meeting - IATRC
Summary
1. The challenge of measuring non-tariff barriers and the Brazilian beef exports
2. The Econometric model
3. The Intervention Model
4. Results and Concluding Remarks
IntroductionChallenge: the measurement of impacts of sanitary and technical trade barriers
Laird (1996) and Beghin and Bureau (2001): a search of methods
Inventory models; coverage and frequencyindexes; CGE models, tariff equivalents, gravity models etcOnly a few studies in developing countries
Beef sector: one of the most affected
International beef market
Brazil - Since 2004: the major exporter2005: US$ 3.1 billion of exports
Other world’s largest exporters:USA, Australia, New Zealand, Argentina and EUa huge protectionism
Competition and the Pacific Rim market: quality requirements
Brazilian beef exports, by type (1000 thousandtons carcass-equivalent). 1990 to 2005
0 200 400 600 800
1000 1200 1400 1600 1800
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Mil toneladas equivalente-carcaça
Processed In natura Total
Source: ABIEC
Beef market requirements consiston barriers to trade?
Brazilian studies:Procópio Filho (1994): sanitary and environmental issues are used todecrease prices
Ferraz Filho (1997): sanitary rules affect exporting growth rates of companies;
Lima, Miranda & Galli (2005): Brazil is not participating in a beef market amounting to US$ 7.5 billion
Relevance HypothesisSanitary and technical events affect Brazilian beef exports, on quantity or prices, or even both
ObjectiveThis study proposes a (econometric + intervention) methodology to measure the impacts of sanitary or technical events on the Brazilian beef exports.
Econometric Model for External Beef Sales
A reduced form model is estimated based on a structural model;
Assumptions: the imported and domestic goods are not perfect substitutesthere is no perfect substitution in the beef international market
Structural model for Brazilian exports
SI = f (PI, PB, WI) domestic beef suplyDI = g (PI, YI,) domestic beef demand
SI = volume of beef supplied by domestic market;PI = domestic price for Brazilian beef (in R$);PB = Brazilian beef exporting price (R$);WI = domestic supply shifts;DI = beef volume demanded by domestic marketYI = shifts of domestic demand;
XS = SI – DI = h (PI, PB, WI, YI) Xs ≥ 0 XD = m (PB/TC, PW, ZD)
XS = volume of Brazilian beef supplied to the international market; XD = volume of Brazilian beef demanded by the international market; TC = exchange rate (R$/US$);PW = beef price of competitors in the international market (US$); and,ZD = shift of the foreign demand of Brazilian beef.
PX = PB/TC => PX = US$ price of the exported Brazilian beef
In a balanced international market, the Brazilian exports follow: X* = XS = XD
X* = equilibrium quantity of Brazilian foreign sales
Reduced Forms:
The equilibrium price for foreign sales X*:PB = p(PI, WI, YI, TC, PW, ZD)
And the equation for exports volume is a function of:X* = H (PB, PI, TC,WI, YI, PW, ZD) (1)
Assumption: Perfectly elastic international demand
PX = PB/TC = h(PW, ZD) (2)
a) OLS to estimate the reduced formsb) Residual analysis to identify outliers:
- application of a Box-Jenkins model;- the residues as the dependent variable
Transfer Function and Intervention Variable
Transfer function Intervention Variable
ω(B) = moving average operator with l termsδ(B) = an auto-regressive operator with m termsZt a stochastic processXt = the explanatory variable responsible for part of the changes occurred in ZtNt is the error term (residue), represented by the second term in the right sidelag b = the moment the explanatory variable starts to influence Utintervention variabel εt
tbtt aBBX
BBwcZ
)()(
)()(
φθ
δ++= − btB
B−ε
δω
)()(
Representation of intervention variables
A special case of Transfer function
Pulse or step
Vandaele (1983): dynamic effects of intervention variables
DataFrom 1992 January to 2000 December
In natura exports – to EU*Corned beef – to EU and US
A Survey: 10 exporting slaughterhouses werevisited:
In 2000, these companies were responsible for 70.1% (value) and 66.5% (volume) of the Brazilianbeef exports (in natura).
Intervention variables1995 March: EU ban temporarily SP and MG beef exports;1996 March: EU bans imports from UK;1998:
March: FMD outbreaks in Mato Grosso do Sul State –BR;May: RS and SC states declared free from FMD with vaccination;June: partial opening to the UK beef exports to EU;October: FMD outbreak in Naviraí/MS;
2000May: Argentina, RS and SC were recognized as FMD
free zones without vaccination by the OIE;August: FMD outbreaks in Jóia/RS;September: FTAA lifted bans on Argentinean in naturabeef exports because of FMD problems.
Results
Table 1. Results of Brazilian exports model. Beef special cuts to the European Union (vdtue). 1992 January - 2000 December. Series in level
Model: F(9,97) = 79,05* 2R = 0,88 Dependent variable = LVDTUE
Variable Coefficient Test “t”
Constant 18,04* 4,62
ltxreal t-1 0,72* 2,51
lvdtue t-1 0,44* 6,92
Lrpbrarg -0,10 -0,47
lrbras t-1 -0,90** -2,20
lprdiant t-1 -0,23 -0,99
Lpbreal -1,06* -3,09
lvxarg t-1 -0,46* -3,04
Seasonality 0,23* 4,23
Trend 0,0075* 3,77
Modelo: Q(24,1) = 24,89* 2R = 0,92 Variável dependente = LVDTUE1
Variável Coeficiente Teste “t”
Constante 25.62* 4.41 AR(1) 0.28** 2.16 N_SAZ{0}2 0.13 1.28 N_SAZ{1} 0.008 0.05 N_SAZ{2} 0.12 0.89 N_SAZ{3} 0.46* 3.15 N_SAZ{4} 0.62* 3.92 N_SAZ{5} 0.60* 3.10 N_SAZ{6} 0.70* 3.57 N_SAZ{7} 0.43* 2.24 N_SAZ{8} 0.19 1.26 N_SAZ{9} 0.15 1.19 N_SAZ{10} 0.08 0.73 N_LTXREAL{1} 0.59 1.27 N_LVXARG{1} -0.48** -2.47 N_LPBREAL{1} -0.80 -1.46 N_LRPBRARG{0} -0.23 -0.77 N_LPRDIANT{1} -0.47 -1.50 N_LRBRAS{1} -1.62** -2.17 N_TREND 0.002 0.12 N_D0195{0} -0.76* -2.90 N_D0195{1} 0.52** 2.13 N_D0396{1} -0.01 -0.06 N_D0396{2} -0.35 -1.27 N_D0396{3} 0.03 0.12 N_D07{0} 0.32*** 1.75 N_D07{1} 1.42* 4.41 N_D07{2} -0.44 -1.39
Table 2. Results of Box-Jenkins model for Brazilian beef exports, special cuts to the EU (vdtue). January 1992 to December 2000
Intervention ModelJanuary 1995 statistically significant: shock defined as (m,l,d) = (0,1,0), where m is the auto-regressive component, l is the moving average component and d is the lag.
The result shows an immediate intervention impact, valued in a decrease of 0.76% on vdtue; in t+1 a positive effect on exports, decreasing it in 0.52%
- +1
Jan/95 Fev/95 0
(0,52) -0.76 -1
Figure – Sketch on the pattern of the intervention variable (step) effects on Brazilian beef exports to the EU (vdtue ) for January 1995.
Concluding remarks: beef market and intervention analysis
Economic variables were the most significant: expected effects
There is evidence that Brazilian beef exportersface a non perfeclty elastic demand in the EU market: Brazil affects prices
Sanitary events had some significant impacts on quantity and prices of Brazilian beef exports
But It was not possible to explain all thesignificant residues (outliers)
Concluding remarks: about modelling
The intervention model requires detailed knowledge about the determinants of trade and all the possible relevant events that can affect thesector’s performance
Some additional comments: What is the proper pattern of the intervention function in each specific case?Regionalized effects?The occurrences coming just after a previous event analyzed can reduce its original impacts.Update of this study
CEPEA – Center for Advanced Studies on Applied Economics
ESALQ- University of São PauloBrazil
Sílvia Miranda: [email protected]
Geraldo Barros: [email protected]