IDEAS home Printed from https://ideas.repec.org/a/kap/iecepo/v12y2015i1p143-161.html
   My bibliography  Save this article

The transmission of oil and food prices to consumer prices

Author

Listed:
  • 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. Copyright Springer-Verlag Berlin Heidelberg 2015

Suggested Citation

  • Ansgar Belke & Christian Dreger, 2015. "The transmission of oil and food prices to consumer prices," International Economics and Economic Policy, Springer, vol. 12(1), pages 143-161, March.
  • Handle: RePEc:kap:iecepo:v:12:y:2015:i:1:p:143-161
    DOI: 10.1007/s10368-014-0283-x
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s10368-014-0283-x
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. 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, vol. 95(2), pages 275-281.
    2. Hansen, Bruce E. & Seo, Byeongseon, 2002. "Testing for two-regime threshold cointegration in vector error-correction models," Journal of Econometrics, Elsevier, vol. 110(2), pages 293-318, October.
    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.
    4. 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.
    5. Breisinger, Clemens & Ecker, Olivier & Al-Riffai, Perrihan, 2011. "Economics of the Arab awakening: From revolution to transformation and food security," Policy briefs 18, International Food Policy Research Institute (IFPRI).
    6. Kremers, Jeroen J M & Ericsson, Neil R & Dolado, Juan J, 1992. "The Power of Cointegration Tests," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 325-348, August.
    7. Canova, Fabio & Ciccarelli, Matteo, 2011. "Cyclical fluctuations in the Mediterranean basin," Working Paper Series 1367, European Central Bank.
    8. Urbain, Jean-Pierre, 1992. "On Weak Exogeneity in Error Correction Models," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(2), pages 187-207, May.
    9. Nadeem Ilahi & Riham Shendy, 2008. "Do the Gulf Oil-Producing Countries Influence Regional Growth? The Impact of Financial and Remittance Flows," IMF Working Papers 08/167, International Monetary Fund.
    10. Elena I. Ianchovichina & Josef L. Loening & Christina A. Wood, 2014. "How Vulnerable are Arab Countries to Global Food Price Shocks?," Journal of Development Studies, Taylor & Francis Journals, vol. 50(9), pages 1302-1319, September.
    11. Hadi Salehi Esfahani & Kamiar Mohaddes & M. Hashem Pesaran, 2014. "An Empirical Growth Model For Major Oil Exporters," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 29(1), pages 1-21, January.
    12. Belke, Ansgar & Beckmann, Joscha & Verheyen, Florian, 2013. "Interest rate pass-through in the EMU – New evidence from nonlinear cointegration techniques for fully harmonized data," Journal of International Money and Finance, Elsevier, vol. 37(C), pages 1-24.
    13. Sachs, Jeffrey D. & Warner, Andrew M., 1999. "The big push, natural resource booms and growth," Journal of Development Economics, Elsevier, vol. 59(1), pages 43-76, June.
    14. Guglielmo Caporale & Luca Onorante & Paolo Paesani, 2012. "Inflation and inflation uncertainty in the euro area," Empirical Economics, Springer, vol. 43(2), pages 597-615, October.
    15. Donald F. Larson & Julian Lampietti & Christophe Gouel & Carlo Cafiero & John Roberts, 2014. "Food Security and Storage in the Middle East and North Africa," World Bank Economic Review, World Bank Group, vol. 28(1), pages 48-73.
    16. Canova, Fabio & Ciccarelli, Matteo, 2012. "ClubMed? Cyclical fluctuations in the Mediterranean basin," Journal of International Economics, Elsevier, vol. 88(1), pages 162-175.
    17. Breisinger, Clemens & Ecker, Olivier & Al-Riffai, Perrihan, 2011. "Economics of the Arab awakening [in Arabic]: From revolution to transformation and food security," Policy briefs 18 AR, International Food Policy Research Institute (IFPRI).
    18. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
    19. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-1580, November.
    20. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:eee:eneeco:v:69:y:2018:i:c:p:185-195 is not listed on IDEAS

    More about this item

    Keywords

    Oil and food price transmission; Asymmetric error correction; MENA region; C22; E31; Q02;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:iecepo:v:12:y:2015:i:1:p:143-161. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla) or (Rebekah McClure). General contact details of provider: http://www.springer.com .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.