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

Lotanna E. Emediegwu and Marco Rogna

No 355335, Agricultural Economics Society (AES) 98th Annual Conference, The University of Edinburgh, Edinburgh, UK, March 18-20, 2024 from Agricultural Economics Society (AES)

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.

Keywords: Demand and Price Analysis; International Relations/Trade (search for similar items in EconPapers)
Pages: 31
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aes024:355335

DOI: 10.22004/ag.econ.355335

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