International Transmission of Food Prices and Volatilities: A Panel Analysis

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

Description

High and volatile food prices pose a significant policy challenge around the world, and an understanding of the dynamics of food price inflation and volatility is essential in designing appropriate policy responses. Using the panel data for 72 countries from 2000 to 2011, the paper assesses the international transmission of food price inflation and volatilities as well as the effects of various internal and external factors on domestic food price inflation and volatility. The paper offers evidence in support of the international transmission of food price inflation and volatility. Specifically, the paper finds that the domestic food price inflation in Asia is strongly associated with the lagged value of global food price inflation (using the FAO food price index), while volatility spillovers from global to domestic food prices are rather contemporaneous. The paper also finds that both national food price inflation rates and volatilities are strongly associated with both intra- and extra-regional food price inflation rates and volatilities, respectively. The findings also suggest that higher economic growth rates, greater shares of food in merchandise imports, and smaller increases in the share of food in merchandise imports lead to lower domestic food price inflation. An appreciation of local currency, greater political stability, and higher income level are also found to lower domestic food price inflation. On the other hand, higher economic growth rates lead to lower volatilities 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
Examining the Determinants of Food Prices in Developing Asia
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
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
  • Global and National Food Price Trends
  • Model Specifications
  • Results
  • Summary and Policy Implications
  • References