Increase In Domestic Prices Research Articles

Exchange Rate Pass-Through into Import Prices: Evidence from Türkiye during 2010-2020 Period

This article analyses pass through of exchange rates into the import prices for an emerging economy, Türkiye, which faced severe fluctuations in the nominal exchange rate in the recent years, and experienced significant increases in domestic prices. The Turkish economy continues to struggle due to high inflationary pressures and a steep Turkish Lira (TL) devaluation particularly after 2017. This study aimed at examining the relationship between exchange rate and import prices using quarterly data for the period of 2010q1-2019q1, while the empirical methodology is framed in the multivariate cointegration analysis, along with the application of the Johansen cointegration test and the development of an autoregressive error correction vector for the determination of the pass-through in the long term. Our findings show that 85.6% of the fluctuations of the nominal exchange rate are transmitted to the import prices in the mentioned period, slower than the findings of the study by Akgunduz and his colleagues as the difference of import prices from its long-run relationship implied by the real exchange rate is likely dominated by energy prices in a strong manner. Second significant finding derives from the parameter that measures the speed of the pass-through, whose estimate has been found as -0.0125, inferring that the adjustment in short-term imbalances between import prices and the nominal exchange rate through changes in import prices is rather slow.

Cointegration Behavior and Diagnostic Stability of Philippine Monetary Policy Implementation During the Period From 1990 to 2022

The observations made in this study were used to evaluate the diagnostic stability of the Philippine Central Bank’s selected monetary policy targets, namely, the Gross Domestic Product and inflation, with money supply, credits, interest rates, and exchange rates, as independent variables, using the autoregressive distributed lag and error correction model analysis. The co-integrating behavior depicted that all p-values of less than the 5% significance level generated different behaviors. However, analysis of the Central Bank’s performance showed that there were no unit roots at all (p > .05) that signified a strong indication of cointegration behavior. The diagnostic stability of the Philippine monetary policy implementation was established over the period from 1990 to 2022. Further, money in circulation caused increases in domestic prices, interest rates, and inflationary pressure, and ultimately affected GDP (ppp). Understanding cointegration behavior is an imperative implication for policy makers to observe and take into consideration.

Impact of carbon tariffs on price competitiveness in the era of global value chain

More and more countries are joining the discussion on climate mitigation through a range of emissions reduction policies such as carbon pricing. However, differences in carbon prices and policy intensity have led countries to worry about issues such as unilateral competitiveness loss and carbon leakage, and carbon border adjustment mechanisms have emerged. This paper analyzes the impact of carbon border adjustment on price competitiveness with the carbon tariff system to be implemented by the EU and the US. First, we obtain the cost pass-through rates of 14 regions-3 sectors through the panel regression of error correction model, and corrects the input–output price model for incomplete cost transmission. Combined with global inter-industry linkages, the impact of carbon tariff levy on the real effective exchange rate, the main indicator of price competitiveness of each region and industry, is examined for the EU CBAM and the US Clean Competition Act. On this basis, we use the effective rate of protection which is adjusted with global value chain, to analyze the positive effect of carbon tariff policy on domestic producers. Finally, the welfare effects of residential households are estimated, after quantity adjustment using the real effective exchange rate. The results show that when only direct carbon tariffs are analyzed, the impact of the US Clean Competition Act is greater than that of the EU CBAM for Australia and Canada, and for Japan and other regions, the sanctioning effect of the EU CBAM is more significant. When considering the impact of cumulative tariffs in the upstream, the output prices of countries further increase, and the cumulative carbon tariffs of the US under the two scenarios are as high as 0.61 % and 0.81 %. According to the results of the real effective exchange rate, the price competitiveness of the US and Russia decreases. The effective rate of carbon tariff protection is negative in all countries except for the implementers of carbon tariffs - the US and the EU, which means that the producers lose value added due to carbon tariffs. Finally, the welfare effects analysis shows that the two largest causes of welfare losses are the increase in domestic prices and the prices of imported goods from the US.

The relationship between exchange rate volatility and inflation in Turkey

Purpose- Many studies pointing out that the exchange rate depreciations underlies of the inflation problem, which is still keep up to-date, provides empirical evidences about the existence of a direct relationship between the exchange rate and domestic prices. In addition to this phenomenon called exchange rate pass-through, we also think that exchange rate volatility can also have an impact on domestic prices. The aim of this study is to investigate the relationship between inflation and exchange rate volatility, which is characterized by the increase in risks and the creation of an environment of uncertainty in Turkish economy. Methodology- In our study, we run an augmented philips curve equation to estimate the effect of exchange rate volatility and other variables on inflation. We measure exchange rate volatility as the standard deviation and GARCH (1,1), which are frequently used in the literature. In addition, we use the time-varying parameter approach to estimate the direction in which the effect of exchange rate volatility on inflation changes over time. Findings- According to the findings, the parameters in the philips curve equation are statistically significant and reasonable in line with the economic theory. The coefficient of inflation inertia is estimated to be 0.33. This indicates that approximately one-third of a 1% increase in inflation comes from past inflation. The ERPT is calculated as 18% for the short term and 27% for the long term. The fact that the exchange rate volatility parameters are statistically significant confirms our hypothesis. Accordingly, an increase of 1 conditional standard deviation in exchange rate volatility leads to an increase in domestic prices by 0.71. We also provide evidences that the impact of both exchange rate and exchange rate volatility on inflation increases over time. Conclusion- The results show that, in addition to the exchange rate, exchange rate volatility also has a significant effect on inflation. This provides credible evidences that exchange rate uncertainty should be an additional indicator, such as the exchange rate, to achieve price stability and monetary policy goals. Keywords: Exchange rate volatility, exchange rate pass-through, inflation, time-series models, monetary policy JEL Codes: E31, C32, E52

Effects of exchange rate pass-through on inflation in Vietnam

The main purpose of this study is to investigate the effect of exchange rate pass-through (ERPT) on domestic price of goods and services in Vietnam under the impact of the interest rate and refinancing rate over the period 2014 to 2019. Unit root test and many Diagnostic tests are conducted before applying the Vector Auto Regressive (VAR) model. Estimation results indicate that exchange rate changes have a positive impact on domestic consumer price level means that an increase in the depreciation of Vietnam dong could cause an increase in domestic price, the degree of ERPT into domestic price level is smaller than interest rate and refinancing one. The study also indicates many problems existing in the actual situation in Vietnam. From those analysis results, the study has proposed monetary policy orientations to help stabilize prices and develop macroeconomics.

Impact of export duties on the Russian wheat market

The aim of the research is to assess the impact of the introduction of export duties on changes in the Russian wheat market situation. The work examines the mechanism of wheat export regulation in Russia in current conditions, and also identifies its shortcomings and proposes the ways to eliminate them. The methodology of the research is based on the theory of industry markets, including the analysis of the effects of export restrictions. The study includes the period of 2017-2021. The paper shows that losses of domestic wheat producers due to export duty will exceed $ 1 billion on an annual basis since June 02, 2021. The consumer gains will reach US$ 10 million, and state budget revenues will reach US$ 10 million. The government revenues from the customs duty would be US$ 1.4 billion. The net result of Russia from the introduction of the export duty will be negative, amounting to – $ 400 million. Wheat export in Russia should not be severely restricted to prevent domestic price increases. Despite the imposed export duties, producer prices for wheat raise significantly: in August 2021 the price was $174.3 per 1 ton, in November 2021 it was $205.8. The author proposes to abolish export restrictions and focus policy measures on improving the transport system, market, information infrastructure and the spread of digital technologies in grain production, storage and transportation. The economic characteristics of the effectiveness of tariff measures can be of great value to government authorities, agricultural producers and researchers. They make it possible to improve the strategy of state export regulation in accordance with the tasks of development and the needs of society and the economy.

Impact of the US Dollar Index and Crude Oil on Prices of Arabica and Robusta Varieties of Indian Coffee

Coffee is one of the largest traded agri-plantation commodities consumed as a popular beverage across the globe. India exports 75% of its coffee to Europe, the USA, and other developed countries; however, prices depend upon multiple factors of national and international importance. This study makes an in-depth analysis of the US dollar, crude oil, International Coffee Organisation’s (ICO) coffee spot, and futures on Indian coffee auction prices of Arabica and Robusta. The study adopting causal research method examined cointegration and relative effect by administering Johansen cointegration, vector error correction model under VAR environment, VEC-Granger causality, and block exogeneity Wald test. The study found cointegration and long-run association of the US dollar index and crude oil on Arabica than Robusta coffee. Hence, any change in the prices of ICO spot, Arabica coffee futures, crude oil, and the US $ index leads to long-term change in the Indian Arabica coffee auction prices. Coffee exporter should hedge their currency risk on Arabica export and coffee farmers may anticipate increase in domestic prices against sharp rise in US dollar.

Transmission of world price shocks - Evidence from GCC countries

This study examines whether the positive and negative shocks in world commodity prices transmit symmetrically to the domestic prices of GCC economies while using threshold autoregressive (TAR) model. The empirical results indicate that the positive shocks in world prices do transmit to the domestic prices of these economies whereas, the negative shocks are not transmitted. Moreover, for certain commodity-groups, which respond to both positive and negative shocks, the speed of transmission is relatively faster with respect to the positive shocks as compared to negative shocks. These findings indicate that the agents in these economies prefer to choose inaction in response to negative world price shocks whereas, the positive shocks of even smaller size trigger quicker upward adjustments in the domestic prices. Consistent with the predictions of menu cost models, these results imply that the shocks in world prices which raise the desired level of domestic prices, cause quick and large increase in domestic prices whereas the shocks that lower the desired prices, cause a small or no decrease in these prices. These results underline the fact that despite adopting a number of trade reforms, the markets of these economies are still characterized with lower degrees of competitiveness, higher imperfections and other related inefficiencies.

IMPACT OF ECONOMIC AND TRADE EXPANSION OF CHINA ON EMPLOYMENT AND HOUSEHOLD WELFARE IN BURKINA FASO: A COMPUTABLE GENERAL EQUILIBRIUM ANALYSIS

The impact of economic and trade expansion of China on Burkina Faso's economy is analyzed in this work through three channels: trade in goods and services, foreign direct investment and development assistance. To capture the direct and indirect effects of Chinese growth, we use a computable general equilibrium model. The results show that expanded trade with China leads to an increase in domestic prices, an increase in exports to China among product categories for which exports increases, and an increase in imports. The effect on growth, value added ad household wellbeing is small. We find a decline in domestic prices, an increase in exports and a decline in imports. Higher FDI inflows induce additional economic growth equal, increased total labour demand and increased average household well-being, especially among cotton farmers.Keywords: FDI, Aid, trade, CGE, Chine, Burkina FasoJEL Classifications: F14, F35, D58, O19DOI: https://doi.org/10.32479/ijefi.10699

The 2018 American Steel Tariffs: Incidence, Pass-Through, and Price Coordination

We examine the impact of the steel tariffs imposed by the United States in 2018. The tariffs were unusual in their size – 25% – and comprehensive coverage. These characteristics, as well as the concentrated nature of the U.S. industry, make the tariffs a useful instrument for measuring pass-through both in border prices and in prices charged by domestic industry. We find that the tariffs were fully absorbed by importers and led to price increases, roughly equal to the tariffs, in the American steel industry. The large domestic price increases, which began in advance of the imposition of the tariffs, are most parsimoniously explained as an instance of price coordination. The effects included large transfers from steel consumers to domestic steel producers and significant dead-weight losses. The increase in capacity utilization in the steel industry, the leading stated goal of the tariffs, came at a cost in transfers to steel producers of about $3.4 billion per percentage point of capacity utilization and a dead-weight loss of $1.1 billion per percentage point for our 15-month study period. These are not one-time costs but represent the continuing impact of the tariffs. Our results demonstrate the damage that tariffs can create even if they are temporary and are employed as a negotiating tactic.

Reflections on Sustainable Development Planning in the Agricultural Industry

In the past few years, we have experienced a transition from the decades-long period of falling real prices of grains, and food more generally, to a new market environment in which commodity and food prices are higher, more volatile and more highly influenced by petroleum prices.
 The problems of reaction for price volatility, both in the short- and long-run, are complex and multifaceted. Looking back at the 2007/08 crisis, countries responded through a spectrum of policies, but were largely unprepared, resulting in ad hoc and short-term mechanisms. Countries maintaining food reserves used these to intervene directly in the market to stabilize domestic prices. Many food importing countries reduced import tariffs, while several surplus producing countries limited, or even banned, exports in order to avoid food shortages and further domestic price increases. For whatever actions governments consider taking, it is always important to keep in mind the full set of policy measures, the wider risks and possible responses for the targeted population. The following suggests that choosing appropriate policies requires a deeper understanding of the issues at stake.
 This paper analyses the various theoretical approaches to the planning of agricultural and food areas of Kazakhstan. The authors consider that the method of forecast scenarios is the most effective one.

Indonesian aquaculture futures: An analysis of fish supply and demand in Indonesia to 2030 and role of aquaculture using the AsiaFish model

This paper explores the seafood sector in Indonesia, using fish supply-demand modeling, with special focus on the growing role of aquaculture in the country's food portfolio. The paper describes six scenarios for future fish supply–demand dynamics and examines the role of aquaculture growth in fish supply in Indonesia. A business as usual scenario (BAU) assumed exogenous variables of our supply-demand model following historical trends. Five alternative scenarios explored the implications of stagnant capture fisheries; export-oriented growth of aquaculture; domestic-oriented aquaculture growth; slow growth of aquaculture sector; and disease outbreaks to key aquaculture species. The BAU scenario projected that fish supply and demand in Indonesia continues to increase over time and strong aquaculture growth is critical to meet increasing demand for fish. Stagnant capture fisheries resulted in increasing fish prices and decreasing fish consumption. Export-oriented aquaculture growth benefitted fish supply and exports, but also helped lower domestic prices and thus increase consumption. An emphasis on domestic aquaculture commodities increased fish supply, providing best domestic consumption outcomes and lower consumer prices. Slow aquaculture growth reduced fish supply and led to undesirable increases in domestic prices and decreasing domestic consumption as a consequence. Disease outbreaks in shrimp and carp aquaculture resulted in a short-term reduction in aquaculture output and increasing fish prices, lowering fish consumption.

ВЛИЯНИЕ ТАМОЖЕННЫХ ПЛАТЕЖЕЙ НА ЭКОНОМИЧЕСКУЮ БЕЗОПАСНОСТЬ СТРАНЫ, ПРОБЛЕМЫ И ПУТИ ПРЕОДОЛЕНИЯ

The article considers the role of customs payments as one of the main revenue sources of the state budget of Ukraine. The volume of receipt of customs payments to the state budget is characterized. The structure of receipts from customs payments for 2016-2017 is considered. Problems that violate the stable level of economic security of the country are identified. The complex of measures proposed to resolve deficiencies in the system of collection of customs payments to the State Budget of Ukraine is considered. The purpose of this article is to reveal the content and role of revenues from customs payments to the state budget and their impact on the country’s economic security. The subject of research: the impact of customs payments on the country’s economic security. The methodological basis of the study is a set of general, scientific, specific scientific and special methods and approaches, which helped to realize the conceptual unity of the research. In particular: an integrated approach that is used to analyse the collection of customs payments methods of induction and deduction, formalization to study the mechanism of charging customs payments, the method of analysis – in the study of the main elements of the collection of customs payments in Ukraine. Positive and normative research methods are used to develop proposed budget revenues from receipt of customs payments and to ensure stable economic security. Results. Thus, according to the results of the analysis, in 2017, there is a clear tendency to increase revenues to the state budget, including from customs payments. Thus, in 2017, the total amount of customs payments amounted to 277.27 billion UAH, which is 57.24 billion UAH more than the previous year (220.03 billion UAH). That is, customs payments increased by 26%. Economic implications. However, there are some problems in collecting customs payments to the state budget, which in turn violate a stable level of economic security of the state. To the problems that violate a stable level of economic security can be attributed: improper development of individual industries and industries that need to work efficiently and get further development in Ukraine, excessive customs duties can also lead to a shortage of goods in domestic markets and an increase in domestic prices. All this will negatively affect the economic security of the state. Therefore, when establishing customs duties, it is necessary to take into account their impact on the economic security, to predict the possible socio-economic consequences of the application of certain rates of customs duties. Conclusion. Taking into account the importance of customs payments in the formation of the State Budget and ensuring the economic security of Ukraine, we believe that the practice of charging customs payments in Ukraine requires the introduction of new ideas. In recent years, many interesting and effective methods of customs and tariff regulation have been applied in the world, which could be useful for Ukraine. At the present stage, the most appropriate is the use of the experience of the countries of Central and Eastern Europe, which recently joined the EU.

Price transmission, asymmetric adjustment and threshold effects in the cotton supply chain: a case study for Vidarbha, India

AbstractThis study examines price transmission asymmetries in Vidarbha's (India) cotton supply chain from 2002 to 2012. The analysis takes account of thresholds in price adjustments toward their long‐run equilibrium. The first stage considers the price dynamics between international and Indian domestic cotton prices. The second stage considers price transmission from domestic to farm gate cotton prices in Vidarbha. Results from the first stage indicate that Indian and international cotton markets are well‐integrated. In contrast, the second stage reveals significant threshold‐type nonlinearities as well as asymmetries in price transmission between domestic and farm gate prices. The short‐run dynamics suggest that the pass‐through from domestic to farm gate prices is larger when domestic prices decrease than when they increase. Moreover, back of the envelope calculations suggest that the loss in revenue for a typical farmer from a decrease in domestic price is larger than the gains from an increase in domestic price of the same magnitude. The implication is that traders benefit from price fluctuations at the expense of farmers. Evidence from fieldwork in Vidarbha suggest that asymmetries revealed in this analysis may be linked to trader's market power and inadequate market information among farmers.

Empirical analysis of transportation demand for oil products in Nigeria: Using error correction approach

This paper analyses the demand for petroleum products (gasoline and diesel) in Nigeria using time series data (1980–2013). The analyses of the trend in the consumption of products has shown that the consumption initially maintained and increasing trends, latter declined considerable with the increase in domestic prices. This underscored the important of market base pricing which will encourage efficiency, save foreign exchange, reduce fiscal burden and attract investment in the sector. Further the paper uses the Unrestricted Error Correction Models (UECM) developed by Pesaran and Shin (1999) to estimate the demand functions for oil products. The price and income elasticities for the demand function for gasoline, diesel and aggregate – are estimated in the analysis. The estimated elasticities are compared with those of similar studies in developing countries. The outcome shows that there is no significant difference between the findings of this study and previous studies in similar contexts. The results suggest that consumption of individual products is more elastic to changes in income than real prices. The income elasticities of demand are 0.6513 for the aggregate, 0.5886 for gasoline and 1.3456 for diesel. However, the price elasticities are −0.1763 for the aggregate, 0.0973 for gasoline and −0.3199 for diesel.

Trade subsidies, export bans and price stabilization: Lessons of Bangladesh–India rice trade in the 2000s

During the world food price crisis of 2007–08, rice importing countries suffered through a sharp increase in international rice prices and disruptions in supply as several rice exporters restricted trade to mitigate their domestic price increases. Perhaps no country was more affected by these disruptions than Bangladesh. Our analysis shows that prior to the 2007 crisis, when Bangladesh imported an average of nearly 1 million tons of rice per year from India, domestic wholesale prices of rice in Bangladesh were co-integrated with import parity prices of subsidized Below Poverty Line (BPL) rice. When in mid-2007, India sharply curtailed exports, rice prices surged in Bangladesh.Model simulations show that a relatively small increase in private consumer stocks equivalent to about 2weeks of normal consumption could account for the large surge in domestic prices in Bangladesh and that an additional 300,000 tons (in addition to approximately 700,000 tons of net rice distribution that actually occurred) would have been sufficient to stabilize prices in the November 2007–April 2008 period. The Bangladesh analysis thus shows that in spite of the uncertainty in international markets, careful planning, timely interventions and openness to trade can substantially reduce requirements for public stockholding.

Import sensitive products and perverse tariff‐rate quota liberalization

Abstract This paper shows that a Tariff‐Rate‐Quota's (TRQ) minimum access expansion can perversely trigger domestic price increases. Often, TRQs have prohibitive over‐quota tariffs to mimic import quotas in providing minimum market access. In the WTO's Doha Round, it is likely that countries using TRQs will avoid aggressive tariff reductions if they increase the quota portion of TRQs. We show that when the import price lies between the unit cost of production and the price received by domestic upstream firms, an increase in import quota as a share of domestic production may cause an increase in the domestic retail price.

Yemen: Descending into Despair

Yemen: Descending into Despair

Cereal Price Transmission in Several Large Asian Countries during the Global Food Crisis

World cereal prices have been increasing substantially since 2003. Until 2008, the Asian countries examined in this paper (Bangladesh, China, India, Indonesia, the Philippines, Thailand and Viet Nam) had generally been able to contain domestic price increases by using trade policies and taking advantage of the depreciation of the US dollar. On average, domestic price increases in real terms were only about one third of the world price increases in real US dollar terms. In the face of large world price increases in early 2008, the transmission to domestic markets was still incomplete, but prices increased substantially in some countries. In other countries, however, prices increased very little, if at all. Trade policies explain some of the different outcomes across countries, but speculative activity by farmers, traders, and consumers also appears to have played a role. While there has been incomplete transmission between world and domestic markets, transmission within national borders has been stronger in the sense that, for any given country, percentage increases in farm and consumer prices have been similar. The overall price increases during the past several years have probably been large enough to create a supply response, even in the face of higher fertilizer prices.

Economic Impact of Tourism on Fiji's Economy: Empirical Evidence from the Computable General Equilibrium Model

Tourism is Fiji's largest industry, earning over F$500 million in foreign exchange and employing around 40,000 people. The tourism industry over the last decade has grown at an annual rate of 10–12%. The expansion of tourism, which generates more expenditure in the economy, is likely to have implications for other industries. In this paper, the aim is to delineate the long-run impact of a 10% increase in tourist expenditure on Fiji's economy. To achieve this, the author uses a computable general equilibrium model. Among the key findings are that a 10% increase in tourist expenditure in Fiji will increase GDP by 0.5% and contribute to an improvement in the balance of payments, real consumption will increase by 0.72% and real national welfare will increase by 0.67%. It is also found that an expansion of tourism will lead to an appreciation of the exchange rate, together with an increase in domestic prices and wage rates, and so traditional export sectors will experience a decline in their export competitiveness. In Fiji's case there is evidence that the increases in tourism and non-traditional exports outweigh the fall in non-traditional exports caused by an expansion of tourism.