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Grain price and volatility transmission from international to domestic markets in developing countries:

Author

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  • Ceballos, Francisco
  • Hernandez, Manuel A.
  • Minot, Nicholas
  • Robles, Miguel

Abstract

Understanding the sources of domestic food price volatility in developing countries and the extent to which this volatility is transmitted from international to domestic markets is critical to help design better global, regional, and domestic policies to cope with excessive food price volatility and to protect the most vulnerable groups. This paper examines price and volatility transmission from major grain commodities to 41 domestic food products across 27 countries in Africa, Latin America, and South Asia. We follow a multivariate generalized auto-regressive conditional heteroskedasticity approach to model the dynamics of monthly price volatility in international and domestic markets. The period of analysis is 2000 through 2013. In terms of price transmission in levels, we observe only lead-lag relationships from international to domestic markets in few cases. To calculate volatility spillovers, we simulate a shock equivalent to a 1 percent increase in the conditional volatility of prices in the international market and evaluate its effect on the conditional volatility of prices in the domestic market. The transmission of price volatility is statistically significant in just one-quarter of the maize markets tested, almost half of rice markets tested, and all wheat markets tested. Volatility transmission seems to be more common when trade (imports or exports) is large relative to domestic requirements.

Suggested Citation

  • Ceballos, Francisco & Hernandez, Manuel A. & Minot, Nicholas & Robles, Miguel, 2015. "Grain price and volatility transmission from international to domestic markets in developing countries:," IFPRI discussion papers 1472, International Food Policy Research Institute (IFPRI).
  • Handle: RePEc:fpr:ifprid:1472
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    References listed on IDEAS

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    Cited by:

    1. Hualin Xie & Bohao Wang, 2017. "An Empirical Analysis of the Impact of Agricultural Product Price Fluctuations on China’s Grain Yield," Sustainability, MDPI, Open Access Journal, vol. 9(6), pages 1-14, May.
    2. Nelissa Jamora & Stephan von Cramon-Taubadel, 2017. "What World Price?," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 39(3), pages 479-498.
    3. Cruz, Jose Cesar Jr. & Silveira, Rodrigo L. F. & Capitani, Daniel H. D. & Urso, Fabiana S. P. & Martines, Joao G. Filho, 2016. "The effect of Brazilian corn and soybean crop expansion on price and volatility transmission," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 236127, Agricultural and Applied Economics Association.
    4. Jin Guo & Tetsuji Tanaka, 2020. "The Effectiveness of Self-Sufficiency Policy: International Price Transmissions in Beef Markets," Sustainability, MDPI, Open Access Journal, vol. 12(15), pages 1-18, July.
    5. Tetsuji Tanaka & Jin Guo, 2020. "How does the self-sufficiency rate affect international price volatility transmissions in the wheat sector? Evidence from wheat-exporting countries," Palgrave Communications, Palgrave Macmillan, vol. 7(1), pages 1-13, December.
    6. Digvijay S. Negi & Bharat Ramaswami, 2020. "International risk sharing for food staples," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2020-002, Indira Gandhi Institute of Development Research, Mumbai, India.
    7. Jin Guo & Tetsuji Tanaka, 2019. "Determinants of international price volatility transmissions: the role of self-sufficiency rates in wheat-importing countries," Palgrave Communications, Palgrave Macmillan, vol. 5(1), pages 1-13, December.
    8. Gilbert, Christopher L. & Christiaensen, Luc & Kaminski, Jonathan, 2017. "Food price seasonality in Africa: Measurement and extent," Food Policy, Elsevier, vol. 67(C), pages 119-132.
    9. Muhammed A. Usman & Mekbib G. Haile, 2017. "Producer to retailer price transmission in cereal markets of Ethiopia," Food Security: The Science, Sociology and Economics of Food Production and Access to Food, Springer;The International Society for Plant Pathology, vol. 9(4), pages 815-829, August.
    10. Jin Guo & Tetsuji Tanaka, 2020. "Dynamic Transmissions and Volatility Spillovers between Global Price and U.S. Producer Price in Agricultural Markets," Journal of Risk and Financial Management, MDPI, Open Access Journal, vol. 13(4), pages 1-20, April.

    More about this item

    Keywords

    prices; markets; models; commodities;

    JEL classification:

    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • 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

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