two countries. The results for Venezuela, however, demonstrate the opposite conclusions.
For all the importables (maize, milk and sugar), the estimated CV of prices in the APBS
period is greater than in the pre-APBS period.
For exportables, the pattern of changes in price instability across periods is more
similar. For rice, the estimated CV was unchanged (for Venezuela) or decreased
(Ecuador). For sugar in Colombia, the same situation prevailed. Changes in CV’s appear
to be directly due to reductions in the variance of prices across periods. Overall, except
for exportables (rice) in Venezuela, it appears that the introduction of the APBS largely
achieved its stated intention of substituting former domestic price policies with price
stabilization goals and buffering world market price instability by reducing levels of price
variability to producers.
The second part of the analysis shows the contribution to overall price variability
of three components: world market prices, exchange rates, and domestic factors and
policies, including trade policies. Variance decomposition results (not shown here - see
Villoria, 2000) and Figures 2 and 3 - which present the relative contribution of each
component to the variance of the logarithm of domestic prices in pre-APBS and APBS
periods, respectively - demonstrate several important conclusions. First, generally the
most important contributor to domestic price variability in both periods and for almost all
countries and crops is “other factors.” This is understandable since this factor
incorporates a broad range of factors contributing to the gap between international and
domestic price variability. These include transportation costs, marketing margins,
subsidies and taxes, trade barriers and other policies.