Nonlinearity of demand for basic grains imports

evidence from a regime-switching model

Abstract

Since the 1990s, the decrease in the production of basic grains has intensified, such as rice (Oryza sativa L.), yellow corn (Zea mays var. indentata (Sturtev.) L. H. Bailey) and wheat (Triticum), covering this decrease with an increase in imports. The purpose of this research is to analyze the demand for imports of these three grains during the North American Free Trade Agreement (1994-2018). The starting point is the use of linear models, obtaining a minimum goodness of fit, as well as absence of statistical significance of the exogenous variables (economic activity and real exchange rate). It is by using Markov regime-switching models that it is found that the demand for imports behaved in a non-linear way for each study grain. This behavior is seen through two regimes of import volatility, with imports responding symmetrically in each regime to changes in the exogenous variables. Likewise, the results show that the high volatility of imports occurred during economic and financial crises, total elimination of tariffs, variations in international prices and even the effects of climate change. Finally, the results allow us to conclude that the growth of imports of these three basic grains predominated over their decline in the NAFTA era.