Evolution of food price inflation in the European Union 27 member states

Abstract

ABSTRACT The objective of the research is to investigate the evolution of food price inflation in the 27 Member States between January 2001 and May 2022. Our paper focuses on the role of global oil prices, exchange rate volatility, and the impact of the Russian-Ukrainian war, which started in February 2022 and their effects on food prices. We compiled a panel data set that includes monthly values. Based on the a priori test results, Granger causality test, panel ADRL model, along with Random Effects (RE), linear regression with panel-corrected standard errors (PCSE), cointegration regression using panel fully modified ordinary least squares (FMOLS) regression methods and panel event study estimation were applied. Our result shows that both the increasing Brent oil prices and the fluctuating exchange rates significantly stimulated food price inflation in the EU-27. Data demonstrates that Russia’s war against Ukraine also contributed to increasing food prices in the EU-27. In this regard, we also provide a country-level analysis. Our results contribute to theoretical analyses, as well as the implication for policymakers, and food service companies.