Interregional price linkages of fossil-energy and food sectors: evidence from an international input–output analysis using the GTAP database

Abstract

This study examined the impacts of price changes in fossil-energy resources on food prices across the world. We approached this issue with the input–output (IO) price model, which is suitable for evaluating the price effects due to cost-push (supply driven) processes through transaction linkages of intermediate goods. We employ an international interregional IO table comprising 14 regions and 57 industrial sectors, which is compiled from the global trade analysis project (GTAP) 9 database. The results revealed: (1) interregional price linkages are particularly strong between a wheat-producing region and energy producers in the adjacent regions; and (2) the world oil sector appears to exert the strongest effects on mechanized sectors (wheat, plant fibers and fishing) and regions practicing advanced agriculture (East Asia, the US, and Russia). Furthermore, a comparison with empirical observations suggests that approximately one tenth of observed 2-year price changes in US wheat in 2004–2016 can be explained by the cost-push processes derived from the world oil price changes.