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Agricultural Commodities' Price Transmission From International to Local Markets in Developing Countries

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Abstract

The transmission of commodities prices from the international to local markets is an interesting and deeply investigated topic. A fast and strong link between the two levels of the market is seen by economists as a sign of local market efficiency, allowing actors to respond fast to signals coming from the international market. However, the empirical evidence on the topic is very mixed, ranging from a very weak linkage between the two market prices to a high-speed and almost complete transmission. The present paper aims to advance the knowledge on the topic by focusing on the price transmission of four main cereals – maize, rice, sorghum, and wheat – in 23 developing and fragile economies. Employing a recent World Bank dataset with prices for several local markets in select countries, we estimate panel vector autoregressions (PVAR) to analyze the pass-through effects of international price shocks on local food prices. We find evidence for a relatively strong price transmission elasticity for all commodities except sorghum. Furthermore, the observed transmission of shocks is almost immediate. We present the policy implications for these findings.

Suggested Citation

  • EMEDIEGWU Lotanna & ROGNA Marco, 2023. "Agricultural Commodities' Price Transmission From International to Local Markets in Developing Countries," JRC Working Papers on Economic Analysis of Policies for Africa 2023-08, Joint Research Centre.
    • Handle: RePEc:ipt:eapoaf:202308
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    File URL: https://publications.jrc.ec.europa.eu/repository/handle/JRC135279
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    2. Amar, Amine & Antonio, Ronald Jeremy S. & Okou, Cyrille Guei & Pede, Valerien O., 2025. "Stochastic modelling of food insecurity risk in Africa: Use of Vine Copulas and cointegration approaches," 2025 AAEA & WAEA Joint Annual Meeting, July 27-29, 2025, Denver, CO 360696, Agricultural and Applied Economics Association.
    3. Martey, Edward & Onumah, Justina Adwoa & Adusah-Poku, Frank, 2025. "Maize price Shocks, food consumption and the mediating role of access to market in Ghana," Food Policy, Elsevier, vol. 130(C).
    4. Lotanna E. Emediegwu, 2024. "Assessing the Asymmetric Effect of Global Climate Anomalies on Food Prices: Evidence from Local Prices," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 87(10), pages 2743-2772, October.

    More about this item

    JEL classification:

    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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