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Violence and the market for food. Evidence from Kenya

We study the impact of post election violence in Kenya on the food market ain Mombasa and find empirical evidence against predictions of high volatility of prices following violence. Using a data set of flour producing firm, we identity the degree of persistence in prices and quantities by means of techniques based on the concept of long term memory or long range dependence. Prices are found to be highly persistent in both wheat and maize flour, with orders of integration which are around 1 or even above 1, implying permanent effect of the shocks. On the contrary, quantities, though also persistent, appear to be fractionally integrated, with orders of integration in the interval (0, 0.5) pointing towards stationarity, long term memory mean reverting behaviour. Violence is associated with an insignificant increase in prices of both products and a significant decrease in quantities