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Food Price Volatility in Developing Countries and its Determinants

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  • Kornher, Lukas
  • Kalkuhl, Matthias

Abstract

This article contributes to the ongoing discussion on the drivers of food price volatility. Based on theoretical considerations, economical, agricultural, and political determinants of domestic price volatility are identified and discussed. A dynamic panel is estimated to account for country fixed effects and persistence of volatility. Two approaches are followed in order to consistently estimate the impact of time-invariant variables. First, system GMM using levels instead of first differences and, second, a two-step IV estimation using the residuals from the system GMM estimation. Findings suggest that stocks, production, international price volatility, and governance significantly affect domestic price variability. Furthermore, improved functionality of markets and reduced transaction costs can stabilise prices. With respect to agricultural policies, public stockholding seems to be associated with less volatility, whereas trade restrictions do not enhance price stabilisation. Lastly, landlocked countries experience less variability in grain prices, while African countries have more volatile prices than countries on other continents.

Suggested Citation

  • Kornher, Lukas & Kalkuhl, Matthias, 2013. "Food Price Volatility in Developing Countries and its Determinants," Quarterly Journal of International Agriculture, Humboldt-Universitaat zu Berlin, vol. 52(4), pages 1-32, November.
  • Handle: RePEc:ags:qjiage:173649
    DOI: 10.22004/ag.econ.173649
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    More about this item

    Keywords

    Agricultural and Food Policy; Demand and Price Analysis; Food Consumption/Nutrition/Food Safety; Food Security and Poverty;
    All these keywords.

    JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy

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