THE INFLUENCES OF EXPORT CONTROLS ON WHEAT MARKETS IN SERBIA DURING THE FOOD CRISIS 2007-2008

During the food crisis in 2007/2008 the government of Serbia restricted the exportof wheat to ensure that wheat supply on the domestic market is sufficient therebydampening the increase in consumer food prices.This study investigates the effects of the export restriction on the integration, equilibriumand stability of its domestic wheat market. Within the framework of a Markov-switchingerror correction model, we utilize weekly wheat grower prices of Serbia and worldmarket prices and compare the state of the wheat market prevailing in the time periodbefore the crisis to when the exports controls are effective.Our results suggest that although the degree of market integration and thus the long-runprice elasticity do not change during the crisis, the market equilibrium was disrupted andthe stability was reduced during the crisis. Also, we find that the price dampening effectof the export restrictions prevailed only in a short time period and that the Serbian wheatgrower prices even increased beyond the world market afterwards.