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Agricultural commodities’ price transmission from international to local markets in developing countries

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  • Emediegwu, Lotanna E.
  • Rogna, Marco

Abstract

The transmission of commodities prices from international to local markets is an interesting and deeply investigated topic. A fast and strong link between the two levels of the market is seen by economists as a sign of local market efficiency, allowing actors to respond fast to signals coming from the international market. However, empirical evidence on the topic is mixed, ranging from a very weak linkage between prices in the two markets to a high-speed and almost complete transmission. The present paper aims to advance the knowledge on the topic by focusing on the price transmission of four main cereals – maize, rice, sorghum, and wheat – in 23 developing and fragile economies. Employing a recent World Bank dataset with prices for several local markets in select countries, we estimate panel vector autoregressions (PVAR) to analyze the pass-through effects of international price shocks on local food prices. We find evidence for a relatively strong price transmission elasticity for all commodities except sorghum. Furthermore, the observed transmission of shocks is almost immediate. We present the policy implications of these findings.

Suggested Citation

  • Emediegwu, Lotanna E. & Rogna, Marco, 2024. "Agricultural commodities’ price transmission from international to local markets in developing countries," Food Policy, Elsevier, vol. 126(C).
    • Handle: RePEc:eee:jfpoli:v:126:y:2024:i:c:s0306919224000630
    DOI: 10.1016/j.foodpol.2024.102652
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    Keywords

    Commodities prices; Developing countries; Price transmission; Panel VAR;
    All these keywords.

    JEL classification:

    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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