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The Transmission of Oil and Food Prices to Consumer Prices: Evidence for the MENA Countries

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  • Ansgar Belke
  • Christian Dreger

Abstract

This paper investigates the effects of global oil and food price shocks to consumer prices in Middle East-North African (MENA) countries using threshold cointegration methods. Oil and food price shocks increase domestic prices in the long run, whereby the impact of food prices dominates. While global prices are weakly exogenous, consumer prices respond to deviations from the equilibrium relationship. The short run adjustment pattern exhibits asymmetries and is particularly strong after positive shocks. Downward rigidities on wages may play a crucial role in this regard, as the relatively weak reactions of consumer prices after negative shocks are related to labour market institutions and public subsidies. The more rigid the regulations the more pronounced are the asymmetries. Robustness checks show that international price shocks do not affect GDP growth.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.430274.de/dp1332.pdf
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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 1332.

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Length: 25 p.
Date of creation: 2013
Date of revision:
Handle: RePEc:diw:diwwpp:dp1332

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Keywords: Oil and food price transmission; asymmetric error correction; MENA region;

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  1. Ansgar Belke & Joscha Beckmann & Florian Verheyen, 2012. "Interest Rate Pass-Through in the EMU – New Evidence from Nonlinear Cointegration Techniques for Fully Harmonized Data," Ruhr Economic Papers, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen 0350, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  2. José De Gregorio & Oscar Landerretche & Christopher Neilson, 2007. "Another Pass-Through Bites The Dust? Oil Prices And Inflation," Working Papers, University of Chile, Department of Economics wp238, University of Chile, Department of Economics.
  3. Joe Dewbre & Céline Giner & Wyatt Thompson & Martin Von Lampe, 2008. "High food commodity prices: will they stay? who will pay?," Agricultural Economics, International Association of Agricultural Economists, vol. 39(s1), pages 393-403, November.
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  12. Albers, Ronald & Peeters, Marga, 2011. "Food and energy prices, government subsidies and fiscal balances in south Mediterranean countries," MPRA Paper 28788, University Library of Munich, Germany.
  13. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 12(2-3), pages 231-254.
  14. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, Econometric Society, vol. 59(6), pages 1551-80, November.
  15. Baltzer, Kenneth, 2013. "International to domestic price transmission in fourteen developing countries during the 2007-08 food crisis," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  16. David Zilberman & Gal Hochman & Deepak Rajagopal & Steve Sexton & Govinda Timilsina, 2013. "The Impact of Biofuels on Commodity Food Prices: Assessment of Findings," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 95(2), pages 275-281.
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As found by EconAcademics.org, the blog aggregator for Economics research:
  1. The transmission of oil and food prices to consumer prices. Evidence for the MENA countries
    by pmakdissi in NEP-ARA blog on 2014-05-09 12:05:08

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