A Partial Equilibrium Model of the Malawi Maize Commodity Market

Book excerpt: This paper presents a model of the Malawi maize commodity market that is developed for use as a policy analysis tool. The model captures national and local maize market dynamics and the linkages existing within the maize market in the country. This research has been undertaken in order to provide policy makers with a robust tool which can be used to simulate the impact of policy changes on markets and households. Such a tool ensures the availability of evidence for informing food and agricultural policies. The model is a multiequation partial equilibrium model of the national maize market in Malawi. It is developed and linked in a top-down unidirectional manner to the local maize economy via a price linkage equation. A nonbehavioral arithmetic microaccounting approach is used to estimate rural household incomes that are linked to the local economy, through which macroeconomic-level maize price changes transmit. The model can be used as a tool for analyzing the impacts of macroeconomic and agricultural policy changes on the maize industry as well as on rural households that rely on maize. The novelty of the model is that it takes into account the interrelationships between farm/household, local-economy, and national maize market prices, as well as economic theory and existing empirical evidence, to build a framework that is capable of linking to the macroeconomy rural subsistence households that are traditionally deemed to have few or no backward and forward linkages.