How Strong Do Global Commodity Prices Influence Domestic Food Prices in Developing Countries? A Global Price Transmission and Vulnerability Mapping Analysis

This paper examines the world commodity prices pass-through to food inflation in Morocco, over the period 2004-2018, by using Structural Vector Autoregression (SVAR) model on monthly data. Several interesting results are found from this study. First, the impact of global food prices on domestic food inflation is shown significant, which reflects the large imported component in the domestic food consumption basket. Second, the transmission effect is found to vary across commodities. Consumer prices of cereals and oils significantly and positively respond to external price shocks, while those of dairy and beverages are weakly influenced. Third, there is evidence of asymmetries in the pass-through from world to domestic food prices, where external positive shocks generate a stronger local prices response than negative ones. This situation is indicative of policy and market distortions, namely the subsidies, price controls, and weak competitive market structures. Our findings suggest that food price movements should require much attention in monetary policymaking, especially that the country has taken preliminary steps towards the adoption of floating exchange rate regime.

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The Relationship Between Fuel and Food Prices: Methods and Outcomes

Annual Review of Resource Economics ◽

10.1146/annurev-resource-100518-094012 ◽

2019 ◽

Vol 11 (1) ◽

pp. 195-216 ◽

Cited By ~ 3

Author(s):

Karel Janda ◽

Ladislav Krištoufek

Keyword(s):

Time Series ◽

Fossil Fuels ◽

Commodity Prices ◽

Food Prices ◽

Price Transmission ◽

Fuel Prices ◽

Leading Role ◽

Biofuel Policies ◽

Model Time Series ◽

Food Commodities

We review the fuel-food price linkage model—time-series, structural, and general or partial equilibrium models, with most attention devoted to the time-series literature. Our assessment is nested in both the discussion of general commodity prices comovement and the prediction of the most likely development of biofuel policies and production. We show that the introduction of significant biofuels policies around 2005 increased the price transmission between fossil fuels and food commodities, illustrating the intuitively expected leading role of fuel prices over food prices. Particular price linkages dynamically evolve over time, depending on the particular market under consideration. The econometric results show that owing to policy-induced trade barriers, there is no evidence of a sufficiently integrated international biofuels market with the US, European, and Brazilian markets and that biofuel policies in these countries follow separate paths.

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Special safeguards for developing country agriculture: a proposal for WTO negotiations

World Trade Review ◽

10.1017/s1474745603001320 ◽

2003 ◽

Vol 2 (1) ◽

pp. 5-31 ◽

Cited By ~ 3

Author(s):

ALBERTO VALDÉS ◽

WILLIAM FOSTER

Keyword(s):

Developing Countries ◽

Trade Liberalization ◽

Short Duration ◽

Commodity Prices ◽

Price Transmission ◽

Price Risk ◽

Domestic Price ◽

World Price ◽

Safeguard Mechanism ◽

Price Floor

Trade liberalization, particularly QR elimination, enhances border-to-domestic price transmission. A political obstacle to further liberalization (and to exposure to greater price transmission) in developing countries is fear of extended ‘low price’ periods in import-competing sectors. World commodity prices show shock persistence and asymmetry, with short-duration spikes and longer-duration troughs. Developing countries are unlikely to adopt fiscally burdensome domestic programs to compensate for persistent low-price episodes, making border measures attractive. WTO Special Safeguards could address low price problems, but present rules exclude their use by most developing countries. A possible modification of the Special Safeguard Clause could encourage reduction of overall protection. World price characteristics and the implications of low price periods for import-competing farmers are reviewed. To manage low-price risk under WTO commitments a restricted price floor policy could be implemented through a Special Safeguard Mechanism. An example illustrates the levels, frequency and duration of such a price-floor-based surcharge.

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Price Transmission and Effects of Exchange Rates on Domestic Commodity Prices Via Offshore Hedging

SSRN Electronic Journal ◽

10.2139/ssrn.1744049 ◽

2011 ◽

Author(s):

Nongnuch Tantisantiwong

Keyword(s):

Exchange Rates ◽

Commodity Prices ◽

Price Transmission

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The Theory of Agricultural Price Bubble & Price Crash in Global Economy

Applied Economics and Finance ◽

10.11114/aef.v6i5.4464 ◽

2019 ◽

Vol 6 (5) ◽

pp. 168

Author(s):

M.B. Dastagiri ◽

L. Bhavigna

Keyword(s):

Economic Theory ◽

Developing Countries ◽

Agricultural Land ◽

Wholesale Price ◽

Price Transmission ◽

Price Fluctuations ◽

Agricultural Prices ◽

Forecasting Models ◽

Price Bubble ◽

Agricultural Price

Agricultural prices play greater role in living Economics. Since many decades’ farmers faced declining agricultural prices and low prices in developing countries. Therefore, in these countries agricultural price policies are under closer appraisal. Government and policy makers worry about inflation. Economic precision is required in determining prices. This understanding led to conception of the study. The specific objectives are to review various agricultural price theories, research evidences and construct the theory of agricultural price bubble and crash and their effect on macro economy and suggest measures to improve. The study reviews various agricultural price theories, concepts, policies, research gaps and do meta-analysis and formulated the theory of Agricultural prices bubble and price crash. Since 1950, many development economists and practitioners prophesy in developing countries is that low agricultural commodities prices discourage poverty alleviation. Many countries are unable to make successful pricing policies due to there is not enough operative methodological and theoretical support for decision-making. According to the economic theory of cooperativism, the entities come closer to the pecking order theory. Unexpected changes and changes in regulations can have significant impact on the profitability of farming activities. “Demand channel" is the crucial factor in elucidation of commodity price growth. Future prices moments in agriculture have fat-tailed distributions and display quick and unpredicted price jumps. World Trade Organization study highlights the importance of strengthening multilateral disciplines on both import and export trade interventions to food price fluctuations to reduce beggar-thy-neighbor unilateral trade policy. The theory of NAFTA regionalism did not lead to regionalization and not increasing share of intraregional international trade. In EU countries land rents in modern agriculture causing upward trend in agricultural land prices. Information friction, agricultural supports, agricultural price & trade policies, agricultural price transmission are responsible price fluctuations. In economic theory, asymmetric price transmission has been the subject of considerable attention in agricultural gaps. Selection of forecasting models are based on chaos theory. Chaos in agricultural wholesale price data provides a good theoretical basis for selecting forecasting models. This theory can be applied to agricultural prices forecasting. Novelties in agricultural products fluctuations research offer scientific basis in planning of agricultural production.

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