Understanding the spillover effects of ethanol production and energy prices on African food markets: A time-varying approach

Abstract

Amidst recent global uncertainty caused by events such as the COVID-19 pandemic and wars, African countries are finding it even more challenging than before to achieve food security. This study utilizes the time-varying parameter vector autoregression (TVP-VAR)–based extended joint connectedness model to analyze the impact of external factors, such as U.S. ethanol production, grain speculation, international energy prices, international food prices, and international corn prices, on domestic food prices in four African countries (Ethiopia, Ghana, South Africa, and Tanzania). The key results of the study can be summarized as follows: (1) The production of ethanol in the United States has an influence on the food prices in all four sample countries, with the extent of this impact differing from one nation to another. Notably, the effects of ethanol production were particularly pronounced until the years 2011–2012. (2) In Ethiopia and Tanzania, the domestic food market shows only a slight impact from speculative activities, whereas in Ghana and South Africa, these activities have a notable effect. (3) International energy prices play a significant role in shaping the domestic food prices across all four countries.