A Bayesian spatio-temporal analysis of markets during the Finnish 1860s famine

TL;DR

This paper introduces a Bayesian spatio-temporal model to analyze market integration during the Finnish 1860s famine, capturing regional dynamics and shock propagation in pre-industrial grain markets.

Contribution

It presents a novel Bayesian approach that models multiple interdependent markets simultaneously, avoiding traditional econometric limitations and revealing detailed spatial-temporal market behaviors.

Findings

Detected asymmetric 'price ripples' spreading from shock origins.

Confirmed faster market adjustments in urban areas during the famine.

Identified prolonged out-of-equilibrium dynamics and wider famine spread.

Abstract

We develop a Bayesian spatio-temporal model to study pre-industrial grain market integration during the Finnish famine of the 1860s. Our model takes into account several problematic features often present when analysing multiple spatially interdependent time series. For example, compared with the error correction methodology commonly applied in econometrics, our approach allows simultaneous modelling of multiple interdependent time series avoiding cumbersome statistical testing needed to predetermine the market leader as a point of reference. Furthermore, introducing a flexible spatio-temporal structure enables analysing detailed regional and temporal dynamics of the market mechanisms. Applying the proposed method, we detected spatially asymmetric "price ripples" that spread out from the shock origin. We corroborated the existing literature on the speedier adjustment to emerging price differentials during the famine, but we observed this principally in urban markets. This hastened return to long-run equilibrium means faster and longer travel of price shocks, implying prolonged out-of-equilibrium dynamics, proliferated influence of market shocks, and, importantly, a wider spread of famine conditions.