Examining the Determinants of Food Prices in Developing Asia

Date: September 2013
Type: Papers and Briefs
Subject:
Series: Economics Working Papers
ISSN: 1655-5252 (print)
Author: Huh, Hyeon-seung; Park, Cyn-Young

Description

How the price of food is determined has become a critical issue, given the drastic surges in prices in recent years and the prevailing expectation of further increases. Along this line, this paper examines the sources of food price fluctuations in 11 developing Asian countries. The working model is a block vector autoregression (VAR), and 10 variables are classified into three blocks—world, region, and country—depending on their origin and nature. Empirical evidence shows that the regional shock plays a pivotal role in explaining the variations of domestic food prices, particularly at medium- to long-term horizons. Contrary to conventional belief, the world food price shock contributes little to the dynamics of domestic food prices in developing Asia. The findings suggest Asian food markets are more integrated regionally than with the world market. The short-run movements of domestic food prices are accounted for largely by the country’s own shock. Taken together, our findings suggest that promoting food price stability would require efforts at the regional level as well as at the domestic level, reflecting the influence of region-specific factors. Extensions to the developing countries in other regions produce similar findings on the determination of food prices.

See also:

Food Security in Asia and the Pacific
Bilateral Trade and Food Security
Rice Trade and Price Volatility: Implications on ASEAN and Global Food Security
Poverty and Food Security in India
Safety Nets and Food Programs in Asia: A Comparative Perspective
International Trade and Risk Sharing in the Global Rice Market: The Impact of Foreign and Domestic Supply Shocks
International Transmission of Food Prices and Volatilities: A Panel Analysis
Food Prices and Population Health in Developing Countries: An Investigation of the Effects of the Food Crisis Using a Panel Analysis
The Transformation of Rice Value Chains in Bangladesh and India: Implications for Food Security
Overcoming Critical Constraints to Sustaining Productivity Growth in Key Commodities of Asia and the Pacific

Contents

  • Abstract
  • Introduction
  • Model Specification
  • Empirical Results
  • Robustness Check
  • Analyzing Other Regions
  • Summary and Concluding Remarks
  • References