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Transmission of Global Commodity Prices to Domestic Producer Prices: A Comprehensive Analysis

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  • Iqbal, Md Zabid
  • Babcock, Bruce

Abstract

Utilizing a comprehensive dataset that includes a sample of 104 countries for corn, 54 countries for soybeans, 82 countries for wheat, and 77 countries for rice and covers the period from 1991 to 2013, we estimate a globally comprehensive but heterogeneous (country-specific) transmission elasticities between international prices and domestic producer prices. We mainly utilize the traditional two-step Engel-Grange cointegration model and the recently developed nonlinear autoregressive distributed lags (NARD) model to estimate the transmission elasticities. We find mixed evidence on the existence of long-run relationship between international and domestic price. For corn 66 out of 104, for soybeans 27 out of 54, for wheat 47 out of 82, and for rice 49 out of 77 countries, we fail to have a long-run relationship. For corn and soybeans, the long-run relationship is evident in top producing countries whereas the converse is evident for wheat and rice, particularly for rice. We also find that the pass-through of international to domestic prices is asymmetric in the majority cases—these asymmetries are negative, i.e., the domestic producer prices react less fully to an increase in international prices than to a decrease and are acute in the short-run than the long-run. We also estimate the cropspecific short-run global mean transmission elasticities, which vary from 0.358 (corn) to 0.524 (soybeans).
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  • Iqbal, Md Zabid & Babcock, Bruce, 2016. "Transmission of Global Commodity Prices to Domestic Producer Prices: A Comprehensive Analysis," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 236285, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea16:236285
    DOI: 10.22004/ag.econ.236285
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    Cited by:

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    2. Mohammad Chhiddikur Rahman & Valerien O. Pede & Jean Balié, 2022. "Welfare impact of asymmetric price transmission on rice consumers in Bangladesh," Review of Development Economics, Wiley Blackwell, vol. 26(3), pages 1600-1617, August.
    3. Rahman, Mohammad Chhiddikur, 2018. "Welfare Impact of Asymmetric Price Transmission on Bangladesh Rice Consumers," EconStor Theses, ZBW - Leibniz Information Centre for Economics, number 251114, January.

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    Keywords

    Agricultural and Food Policy; Demand and Price Analysis; Research Methods/ Statistical Methods;
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