Do FDI inflows and energy price affect the food import dependency in developing countries? Evidence from panel VAR Models

The ability of a country to import food depends on several factors. Considering food security as a priority issue, we focus in this paper on the FDI inflows and the energy price as determinants of food import dependency. Indeed, on the one hand FDI as a substitute/complement to trade flows could impact the depending nation. On the other hand, energy price affects production and transport costs, thereby impacting international trade in food productions. To investigate this relationship, we follow the methodology of Love and Zicchino (2006) by estimating a panel vector autoregressive model (PVAR) of 40 developing countries for the period between 1990 and 2012. The panel is split into two sub-samples. We found that FDI inflows explain food import dependency in low and lower middle-income countries and the energy price proxy influences food import dependency in upper-middle income countries. The impulse response functions’ results are close to those from panel VAR, where an increase in FDI inflows or in energy price leads to more food import dependency in low and lower-middle income countries or in upper-middle income countries, respectively.