Local impacts of a global crisis: Food price transmission, consumer welfare and poverty in Ghana

Abstract

This paper takes a local perspective on global food price shocks by analyzing food price transmission between regional markets in Ghana. It also assesses the impacts of food price increases on various household groups. Taking the 2007–2008 global food crisis as an example, we show that prices for domestic grain products are highly correlated with world market prices. This is true both for products for which Ghana is highly import-dependent (e.g., rice) and the products for which Ghana is self-sufficient (e.g., maize). The econometric results also show that price transmission is high between regional producer markets and markets located in the country’s largest cities, and the distance between producer and consumer markets and the size of consumer markets matter in explaining the price transmission. The welfare analysis for households as consumers shows that the effect of world food prices appears relatively modest for the country as a whole due to relatively diverse consumption patterns within country. However, the national average hides important regional differences, both between regions and within different income groups. We find that the poorest of the poor—particularly those living in the urban areas—are hardest hit by high food prices. The negative effect of the food crisis is particularly strong in northern Ghana. The main explanations for this regional variation in the price effect is the different consumption patterns and much lower per capita income levels in the North of Ghana compared to other regions in the country.