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

Lotanna E. Emediegwu and Marco Rogna

Food Policy, 2024, vol. 126, issue C

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.

Keywords: Commodities prices; Developing countries; Price transmission; Panel VAR (search for similar items in EconPapers)
JEL-codes: C33 Q11 Q13 Q17 (search for similar items in EconPapers)
Date: 2024
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Working Paper: Agricultural Commodities' Price Transmission From International to Local Markets in Developing Countries (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfpoli:v:126:y:2024:i:c:s0306919224000630

DOI: 10.1016/j.foodpol.2024.102652

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