Recent studies into price transmission have recognized the important role played by transport and transaction costs. Threshold models are one approach to accommodate such costs. We develop a generalized Threshold Error Correction Model to test for the presence and form of threshold behavior in price transmission that is symmetric around equilibrium. We use monthly wheat, maize, and soya prices from the United States, Argentina, and Brazil to demonstrate this model. Classical estimation of these generalized models can present challenges but Bayesian techniques avoid many of these problems. Evidence for thresholds is found in three of the five commodity price pairs investigated. Copyright 2007, Oxford University Press.

Highlights Diverse early food policy measures were adopted in response to COVID-19. OECD countries used more economic support, emerging economies more market and trade measures. About a third of 496 reported measures were urgent and necessary or “no-regret” 10.5% of measures had potentially negative impacts on markets, trade or the environment. At least $47.6 billion was allocated by OECD governments to the food sector.

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Input subsidies provide an operationally simple and politically attractive way of addressing multiple objectives. Economic objectives include stimulating production, offsetting high transport costs and input supply costs, making inputs affordable to farmers without credit, and allowing farmers to learn about the benefits of new inputs. In addition, they serve the social objective of transferring income to poor farmers. Input subsidies are an indirect, and relatively inefficient, way of addressing these objectives; they distort the allocation of resources, are prone to capture by vested interests, and often become fiscally costly. Innovative design features can mitigate some of these problems, but if input subsidies are deemed to have a short- to medium-term role it is important that their use does not crowd out spending on essential public goods, or compromise a long term approach of eliminating market failures - as opposed to offsetting them - and getting private markets working without subsidies.