Food Security, Prices and Geopolitical Risk: A Panel Threshold Regression (PTR) Approach

Food security is a critical global issue that has gained increased attention since the onset of the Covid-19 pandemic and its disruption of the world's food supply and agri-food value chains. This article aims to assess the threshold of geopolitical risk at which food security becomes a significant concern for the international community. By analyzing data from a panel of 40 countries, including advanced and emerging economies, over the period from 2012 to 2021, the study examines the relationship between food security and geopolitical tensions. The Food Security Index (FSI) and its four pillars serve as the dependent variables, while the Geopolitical Risk Index (GPRI) acts as the threshold variable. Additionally, factors such as the Covid-19 pandemic, agricultural land area, urban population percentage, inflation, and GDP per capita are considered. The analysis, conducted using a panel threshold regression model (PTR), reveals that geopolitical risk has an inflationary impact. The study identifies a threshold of 0.0261 for geopolitical risk, indicating that beyond this level, global food security is significantly reduced as inflation rises. The findings suggest that geopolitical risks contribute to price spikes in various commodities, including food, fertilizers, and oil, exacerbating inflationary pressures driven by fiscal responses to geopolitical events. Moreover, higher geopolitical risks increase uncertainty regarding inflation outlook, posing greater risks to tradeoffs between fiscal and monetary policies.