Abstract
In this paper, a new spatial equilibrium model is developed to evaluate the effect and feasibility of the international reserve stock policy which the Japanese government has proposed to the World Trade Organization. For the model, a proof of existence of spatial equilibrium is presented. In addition, separated from tariff and transportation cost, the price differential between domestic and overseas markets is calibrated by using a newly developed method.
To illustrate its usefulness, the model is applied to international rice trade. The results of the analysis are as follows. First, the international rice reserve stock policy limited in East Asia will not be put into effect and has little reality. Second, the policy including Bangladesh as a donee of the international reserve stock will contribute to its food security and market stabilization. However, it will cause distortion of international markets and a significantly high policy cost. Third, the cause will be removed by modifying the policy in order that exporting countries can replace developed countries as donors of the international reserve stock.
