Agricultural Commodities' Price Transmission From International to Local Markets in Developing Countries

Lotanna Emediegwu and Marco Rogna

No 2023-08, JRC Working Papers on Economic Analysis of Policies for Africa from Joint Research Centre

Abstract: The transmission of commodities prices from the 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, the empirical evidence on the topic is very mixed, ranging from a very weak linkage between the two market prices 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 for these findings.

Date: 2023-11
New Economics Papers: this item is included in nep-agr and nep-ifn
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Journal Article: Agricultural commodities’ price transmission from international to local markets in developing countries (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:ipt:eapoaf:202308

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