Effects of Market Reforms on Irish Potato Price Volatility in Nyandarua District, Kenya

Abstract

This paper evaluates the effects of market reform policies on the volatility of Irish potato prices in Kenya through an analysis of a 20 year monthly time series data set from Nyandarua district using an autoregressive econometric approach. The empirical results show that there has been a rise in Irish potato prices and lowering of price volatility after the implementation of market reform policies. The real prices exhibit seasonal variations around an upward trend with the prices being depressed during the harvesting period. The price risk premia is found to be negative revealing that the cost of carrying out Irish potato business declined, and farmers were better off with the implementation of the reforms. The collection and distribution of price information, storage of Irish potatoes during periods of glut, improvement in productivity and use of commodity exchange markets can help to reduce price volatility.

Keywords: Price volatility, Market reforms, Autoregressive model