IDEAS home Printed from https://ideas.repec.org/p/ekd/004912/5219.html
   My bibliography  Save this paper

Measuring food price volatility and transmission in West Africa: How important are magnitudes of transmission across cereals and countries?

Author

Listed:
  • Tharcisse NKUNZIMANA
  • François Kayitakire

Abstract

One of the pillars of food security in developing countries is the accessibility to food. Over the last decade, world food market experienced events during which food prices increased significantly. The periods of high food prices were also accompanied by a high degree of volatility in prices. Those events were somewhat transmitted on the local markets in developing countries. Traditionally, transmission of volatilities is analyzed in financial assets but the same exercise is not commonly done in agricultural markets. This research tries to handle the volatility in the selected food prices in agricultural sector and understand the magnitudes of price transmission across foods and countries. The questions to be answered in this study are the following: -Does price volatility occurs at the same degree in different cereal markets; -Is there any relationship between world/International market and domestic markets? -If there is any transmission, what is the speed of adjustment to long-run equilibrium? To measure the price transmission model, the vector error correction model (VECM) developed by Engle and Granger (1987) is used in order to establish any relationship (long-run equilibrium, short-run dynamics) between prices from the World and the domestic cereal markets in different countries. The time series properties of each of the price variables will be examined by using the Augmented Dickey-Fuller (ADF) test (Fuller, 1976). The order of integration of each of the selected cereal prices is determined. Regarding the orders of integration, VECMs or vector auto-regressions (VARs) are specified and estimated. As developed in scientific literature on time series analysis, several criteria like Akaike Information Criterion (AIC) for lag lengths are verified before the VECM and VAR models. In order to handle volatility in different food price series, the generalized autoregressive conditional heteroskedasticity (GARCH) developed by Bollerslev's (1986) as extension from Engle (1982 is used. In this paper the exponential form of GARCH model specified by Nelson (1991) is mobilized to model the asymmetric effects of price shocks on the conditional variance between the World cereal prices and the domestic markets. At this stage, we do not have results but we have some assumptions/hypothesis. The first part on the literature review is finished. As now, we have the data sets on different markets in the countries, we will quickly try to have some results and submit as soon as possible the full paper.

Suggested Citation

  • Tharcisse NKUNZIMANA & François Kayitakire, 2013. "Measuring food price volatility and transmission in West Africa: How important are magnitudes of transmission across cereals and countries?," EcoMod2013 5219, EcoMod.
  • Handle: RePEc:ekd:004912:5219
    as

    Download full text from publisher

    File URL: http://ecomod.net/system/files/Nkunzimana.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Cuddy, John D A & Della Valle, P A, 1978. "Measuring the Instability of Time Series Data," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 40(1), pages 79-85, February.
    2. Paul Cashin & C. John McCDermott, 2002. "The Long-Run Behavior of Commodity Prices: Small Trends and Big Variability," IMF Staff Papers, Palgrave Macmillan, vol. 49(2), pages 1-2.
    3. Aizenman, Joshua & Marion, Nancy P, 1993. "Policy Uncertainty, Persistence and Growth," Review of International Economics, Wiley Blackwell, vol. 1(2), pages 145-163, June.
    4. Ramey, Garey & Ramey, Valerie A, 1995. "Cross-Country Evidence on the Link between Volatility and Growth," American Economic Review, American Economic Association, vol. 85(5), pages 1138-1151, December.
    5. Zivot, Eric & Andrews, Donald W K, 2002. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 25-44, January.
    6. Marilyne Huchet-Bourdon, 2011. "Agricultural Commodity Price Volatility: An Overview," OECD Food, Agriculture and Fisheries Papers 52, OECD Publishing.
    7. Gohin, A. & Chantret, F., 2010. "The long-run impact of energy prices on world agricultural markets: The role of macro-economic linkages," Energy Policy, Elsevier, vol. 38(1), pages 333-339, January.
    8. Balcombe, Kelvin, 2009. "The Nature and Determinants of Volatility in Agricultural Prices," MPRA Paper 24819, University Library of Munich, Germany.
    9. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501.
    10. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
    11. Galtier, F., 2009. "How to Manage Food Price Instability in Developing Countries ?," Working Papers MOISA 200905, UMR MOISA : Marchés, Organisations, Institutions et Stratégies d'Acteurs : CIHEAM-IAMM, CIRAD, INRA, Montpellier SupAgro - Montpellier, France.
    12. Katsushi Imai & Raghav Gaiha & Ganesh Thapa, 2008. "Transmission of World Commodity Prices to Domestic Commodity Prices in India and China," Brooks World Poverty Institute Working Paper Series 4508, BWPI, The University of Manchester.
    Full references (including those not matched with items on IDEAS)

    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:ekd:004912:5219. 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: (Theresa Leary). General contact details of provider: http://edirc.repec.org/data/ecomoea.html .

    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.