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Investigating Dynamic Spillover Effect Of World Prices To Macedonian Food Prices

Author

Listed:
  • Danica Unevska Andonova

    (National Bank of the Republic of North Macedonia)

  • Magdalena Petrovska

    (National Bank of the Republic of North Macedonia)

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.

Suggested Citation

  • Danica Unevska Andonova & Magdalena Petrovska, 2025. "Investigating Dynamic Spillover Effect Of World Prices To Macedonian Food Prices," UTMS Journal of Economics, University of Tourism and Management, Skopje, Macedonia, vol. 16(2), pages 171-188, December.
    • Handle: RePEc:ris:utmsje:022223
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    File URL: https://utmsjoe.mk/files/Vol.16.No.2/3.INVESTIGATING-DYNAMIC-SPILLOVER-EFFECT-OF-WORLD-PRICES-TO-MACEDONIAN-FOOD-PRICES.pdf
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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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