Export Restrictions and Market Uncertainty: Evidence from the Analysis of Price Volatility in the Ukrainian Wheat Market

The impact of export restrictions on market uncertainty has not been investigated before. This paper analyses the development of price volatility in the Ukrainian wheat market characterized by export restrictions during the commodity price peaks 2007/08 and 2010/11 within a dynamic conditional correlation GARCH model. We conclude that the export controls in Ukraine have not significantly reduced price volatility on the domestic wheat market. On the contrary, our findings suggest that the multiple and unpredictable political interference of the Ukrainian government on the wheat export market has substantially increased market uncertainty which led to pronounced additional price volatility in the market. The highly uncertain and unpredictable environment of wheat markets with restricted exports has dramatic consequences for the grain sector in Ukraine and prevents its further development.