INVESTIGATING DYNAMIC SPILLOVER EFFECT OF WORLD PRICES TO MACEDONIAN FOOD PRICES

Danica Unevska Andonova and Magdalena Petrovska
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Danica Unevska Andonova: National Bank of the Republic of North Macedonia
Magdalena Petrovska: National Bank of the Republic of North Macedonia

UTMS Journal of Economics, 2025, vol. 16, issue 2, 171-188

Abstract: Internationally traded commodities often experience sudden and significant price fluctuations driven by a broad range of forces and factors. While thedeterminants of price volatility varyacross commodities, such sudden price developmentsgenerally arise from low short-term elasticities of demand and supply. This study examines the dynamic spillover relationship between global and Macedonian food prices by employing Markov Switching Regression (MSR) and Dynamic Conditional Correlation Generalized Autoregressive Conditional Heteroscedasticity (DCC-GARCH) models.We identifya structural shift in the dynamics of the international-domestic food price relationship, which differs betweenlow- and high-volatility regimes. Additionally, we find that the MKD/USD exchange rate drives the growingdifference between Macedonian and international food prices- reflecting, in fact, EUR/USD fluctuations given the fixed exchange rate of the Denarvis-à-vis the euro, as well as the fact that key global commodities, including food, oil, and fertilizers, are priced in US dollars. Conversely, oil prices tend to narrow this price difference.

Keywords: Foodprice volatility; Domestic food price inflation; Global food price transmission; Markov Switching Regression; DCC-GARCH model (search for similar items in EconPapers)
JEL-codes: C32 E31 F42 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:ris:utmsje:022223

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