Rice price inflation dynamics in the Philippines

In recent years, prices fertilizer, cereals and rice prices have increased significantly due to the Russia-Ukraine war and the export restrictions imposed by India. Thus resulting in higher rice prices in the Philippines. This paper examines the dynamic relationship between rice price inflation and key drivers in the Philippines by estimating a panel vector auto-regression model using monthly data from 1994 to 2023. We find evidence that the effect of world rice price shock is generally the larger and more persistent than the effects of other factors. We also find that movements in rice price inflation are explained by domestic fuel price shocks and to a lesser extent by the world urea price shocks. The impulse response functions driven by those three shocks vary over the sample, especially before a change in food policy such as the imposition of the rice tariffication in 2019. Further analysis suggests that El Niño Southern Oscillation shocks tend to induce an inflationary effect on rice prices in high-poverty and rice-sufficient regions. Our results have important food policy implications for rice markets, and offer timely insights into the desirability of current proposals to reduce rice prices for consumers and improve existing support for famers to boost rice production.