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Energy price and food price nexus in Europe: evidence from heterogeneous panel econometrics

Shujaat Abbas () and Abdul Waheed ()

Journal Global Policy and Governance, 2022, vol. 11, issue 1, 3-20

Abstract: This study modelled increasing food prices across Europe to explore the long-term effect of energy prices along with the other demand and supply-side variables. The panel data of 27 European countries, from 1995 to 2019, are subjected to both first and second-generation panel econometrics to explore long-run coefficients. The estimated result of the panel cross-sectional dependence test revealed cross-sectional dependency; whereas, the findings of both panel IPS and CIPS unit root analysis revealed mixed order of integration. The food prices reveal trend stationary behaviour at level, while agriculture value addition shows stationary behaviour at the level indicating stagnant or decreasing productivity growth. The estimated result of pooled mean group (PMG) estimator has revealed that an increase in oil price, per capita GDP, foreign exchange reserve, and trade openness have a positive impact on food price in the long run; while an increase in agriculture value addition has a negative impact of higher intensity. The sensitivity analysis performed using panel fully modified ordinary least square and augmented mean group estimator have validated the established long-run relationships. This study urges selected European countries to enhance agricultural technology and organization along with diversification of their energy supply by exploiting alternative green energy.

Keywords: Energy price; food prices; panel data; pooled mean group estimator; augmented mean group; FMOLS; Europe (search for similar items in EconPapers)
Date: 2022
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