Download or read book The Political Economy of Export Bans and Commodity Price Volatility written by Michael Adjemian and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We show the importance of accounting for political risk to understand forward-looking price volatility in agricultural markets. We propose a theoretical model that shows uncertainty about the future world price of staple foods is positively related to the likelihood (and, counterintuitively, is further boosted by the actual imposition) of export bans in top producer countries. To test our model's predictions, we use option-implied volatilities (IVols) as a proxy for commodity market uncertainty. We construct a novel, daily dataset of major restrictions on grain and oilseed exports that were announced, adopted, or repealed in 2002-2019. We show that wheat and corn IVols are significantly higher on the day and the week when a ban is first imposed and also during the whole period when the ban is in effect. The effects of export bans are statistically and economically significant. The results hold even when we control for global macro-economic uncertainty and risk aversion (jointly proxied by the equity VIX) and for cash market tightness (including the state of grain inventories) prior to the ban.