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

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, 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.

EMEDIEGWU Lotanna;  ROGNA Marco; 

2024-06-14

ELSEVIER SCI LTD

JRC138152

0306-9192 (online),   

https://www.sciencedirect.com/science/article/pii/S0306919224000630,    https://publications.jrc.ec.europa.eu/repository/handle/JRC138152,   

10.1016/j.foodpol.2024.102652 (online),