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AbstractThe study is a first attempt towards the development of a
stochastic simulation model of the Cyprus meat market utilizing
behavioural relationships estimated within a consistent framework to
analyze the effects of alternative pricing policies. The study provides
quantitative measures of the impacts of alternative feedgrain and milk
price policies and meat import policies on domestic production,
consumption and prices of ruminant and non-ruminant meat, ruminant
animal inventories and foreign trade. It also examines the effects of a
reunification of the country's moslem and christian populations on the
demand for domestic and imported (frozen) ruminant meat and domestic
A block-recursive ruminant model and a simultaneous non-ruminant
model were specified and estimated using annual data from 1960 to 1983.
Both models have shown good statistical properties and forecasting
abilities and are in conformity with economic theory. The models
exhibited stability when subjected to small changes in the parameters
except in the case of the population variable where the ruminant model
seems to be rather sensitive.
Increasing the price of feedgrain paid by livestock farmers either
through a reduction or removal of the existing feedgrain subsidy
results in the contraction of the ruminant and non-ruminant meat
sectors with the former being affected slightly and the latter
substantially. Prices of meat are expected to rise with ruminant meat
prices increasing marginally compared to prices of non-ruminant meat.
An interesting result of the policy experiment is the observed
responsiveness of the domestic ruminant meat market to changes in the
price of milk. It appears that the milk price is a more effective
policy instrument in setting the direction of ruminant meat production
and prices than the feedgrain subsidy or import tariff on ruminant
meat. The low substitution between domestic (fresh) and imported (frozen) ruminant meat causes the imposition of an import tariff on
ruminant meat to have marginal effects on domestic ruminant meat
production, consumption and prices. Imports, however, contract
significantly in the long-run resulting to a substantial increase in
government revenue and decrease in foreign exchange requirements.
The reunification of the country's christian and moslem
populations is expected to cause an overall increase in total meat
consumption. The increase in the demand for ruminant meat, however, is
proportionately larger than that for non-ruminant meat which is
consistent with the consumption behaviour of the moslem community.