International Price Volatility Research Articles

Trade openness and inflation dynamics in ECOWAS countries: An empirical investigation

This paper investigates the long-run and short-run relationship between trade openness and inflation for ECOWAS countries for the period 1970–2020. Using alternative openness measures and estimation methods, it was found that there is a significant positive long-run relationship between trade openness and inflation for ECOWAS countries. The implication of this result is that, if ECOWAS countries continue to import consumption products outside the region rather than capital goods that can increase domestic production, it will be very difficult for member countries to meet the convergence criteria, specifically low inflation required for the proposed monetary unification. In the short run, the results show that there is a negative relationship between trade openness and inflation for ECOWAS countries. This result is specific to a determined period and as the economy gets more open, it becomes more exposed to a higher rate of inflation. Therefore, to meet low inflation criteria, member countries should take it as a matter of urgency to fully implement the ECOWAS trade liberalization scheme to improve intra-regional trade. This would reduce excessive dependence on external imports which makes ECOWAS countries vulnerable to international price volatility, currency depreciation and a high rate of inflation.

International market information and agricultural commodity price dynamics

PurposeThis study aims to investigate the role of international price volatility and inventories on domestic market price dynamics in the case of agricultural commodities.Design/methodology/approachA structural model is employed to uncover relationships among commodity price, price volatility, inventories and convenience yield. Monthly producer price data along with annual data on trade, consumption, inventories and tariffs for 71 countries and 13 commodities covering 2010–2019 are assembled to estimate the model. With a first-stage Least Absolute Shrinkage and Selection Operator (LASSO) estimator to identify the best instrument set, a nonlinear approach is used to estimate the model.FindingsResults show that international market information plays a critical role in domestic market price dynamics. International price volatility has a stronger effect on domestic prices than that of international inventories.Research limitations/implicationsCurrent upheaval in commodity markets requires an understanding of how prices move together and inventories affect that movement. A country's internal price is not independent of the effects of global market events.Originality/valueAlthough hypotheses exist that global market information (volatility and inventories) helps countries manage domestic commodity prices, there have been limited studies on this relationship, especially with a structured model and cross-country data.

The Asian entrepreneurship core in COVID-19 period: value chains, specialized education, massive participation of women and strategic accompaniment

The document seeks to follow up on companies, entrepreneurs and States, on the issue of strategy and entrepreneurship. For this, two parts are taken, “Companies and take-off strategies typical of central and southeast Asia, before the pandemic”, there are unicorn companies, ventures, new versions of organizations before COVID, period from 2012 to 2019. The cases to be studied come from companies, States, organizations, which are located in the center, such as in Southeast Asia: the Republic of India and the People’s Republic of China. It also takes the leading countries of Southeast Asia, led by Japan, first-generation of the Asian Tigers, Singapore, South Korea, Republic of China Taiwan (ROC); second generation, Thailand, Indonesia, Vietnam, among others. Then, strategic cases are described, analyzed, and sought, in the period 2021-2022, the same countries of Central Asia, plus Japan, the first-generation Tigers, all those previously analyzed, plus Hong Kong and the Second generation, all the analyzed in the previous period, plus Malaysia and Cambodia (OJEDA F. A., 2014). Sectors associated public policies, business strategies, exact cases of companies are observed, for each country, before and after the pandemic until today, 2022. With this research scheme, the reader establishes a “road map” of the companies, which has been generated from a highly volatile international environment, but with great opportunities. It is also an attempt to show a business “catalogue of practices” from these countries, which can be an example for Western organizations, in times of global crisis and international price volatility, especially affecting the value chains of food commodities, energy and basic electronic supplies.

Food Import Dependency and National Food Security: A Price Transmission Analysis for the Wheat Sector.

Agricultural trade liberalization and protecting domestic markets encompass conflicting policy goals. Even though after the food crisis in 2008, national governments of food-deficit nations aimed at reducing food supply dependency on external markets, no research has assessed the impacts of food import reliance on price or price volatility transmissions to local markets. We constructed a dynamic conditional correlation (DCC)–generalized autoregressive conditional heteroscedasticity (GARCH) model to examine whether wheat import dependency could make a country vulnerable to overseas shocks by analyzing the inter-relationships between the international wheat price and retail wheat flour prices in 10 net importing countries over the sample period from January 2005 to December 2019. It was found that retail price volatility in each region was positively correlated with international price volatility for most of the period concerned. We also discovered that external dependency could significantly protect the domestic market from the global one, implying that lowering wheat dependency on foreign markets improves “stability” and “availability” of food security without sacrificing “utilization”, but it may aggravate “access”.

International price volatility transmission and structural change: a market connectivity analysis in the beef sector

Despite the abundance of literature on agricultural price transmissions and unexpectedly disrupted value chains from infectious disease outbreaks such as bovine spongiform encephalopathy and COVID-19, the importance of research on price connectivity in the international beef markets has largely been ignored. To assess agricultural price transmission issues, error correction-type models (ECMs) have been predominantly employed. These models, however, suffer a deficiency in that the method is incapable of depicting time-variant linkages between prices. This article examines the connections between global and local prices, as well as price volatility in the beef sector. Our analysis uses a generalised autoregressive conditional heteroscedasticity (GARCH) model with the dynamic conditional correlation (DCC) specification that enables us to identify market connection intensity dynamics. We pay assiduous attention to structural changes in the overall research processes to enhance the reliability of estimation. For the first time in meat or grain price transmission research, our autoregressive models have been developed with structural break dummy variables for DCC. The principal findings are that (1) local retail prices for Azerbaijan, Georgia, Japan, Kazakhstan, Kyrgyzstan, Tajikistan and the UK showed a structural change in mean or variance, all of which were identified after the global food crisis from 2007–2009, (2) international prices unidirectionally Granger-cause regional prices in Georgia, Tajikistan and the United States in both mean and volatility (accordingly, no country exhibited price or price-volatility transmission from regional to international markets), and (3) volatility liaisons between global and local beef markets are generally weak, but price volatility exhibited closer synchronisation around the 2008 global food crisis, which created structural changes during the period. This finding implies that national governments should shield domestic from global markets by implementing trade restrictions such as quotas or taxes in a global emergency.

Dynamic volatility linkages and hedging between commodities and sectoral stock returns in Turkey: Evidence from SVAR‐cDCC‐GARCH model

AbstractHigh volatility in international prices of strategic commodities like oil and gold can have negative effects on the macroeconomics of the emerging economies and their stock markets. This study deals with the analysis of the dynamic relationship between oil, gold and sectoral stock returns in Turkey after the global financial crises. Movements of the sectoral stock returns with the international oil and gold returns have been examined by the Structural Vector Autoregression ‐ corrected Generalized Autoregressive Conditional Heteroskedasticity (SVAR‐cDCC‐GARCH) framework. Our results support the presence of time‐varying co‐movement and volatility spillover from gold and oil to Turkish sectoral stock market. The investigation of volatility has shown that shocks are highly persistent in the long run for all sectoral indices. Furthermore, our results indicate that volatility spillover from international commodity to sectoral indices vary significantly. Results imply that Turkey needs dynamic macroeconomic policies to manage the spillover effects of volatility. The results are also valuable to investors in reducing the risk of their portfolios by diversifying and hedging their investment across different sectors.

How does the self-sufficiency rate affect international price volatility transmissions in the wheat sector? Evidence from wheat-exporting countries

Research on international food prices or volatility transmission have concentrated on importing countries and have largely underestimated the importance of food insecurity or food poverty issues in food-exporting countries. This article identifies the causality between global and regional wheat pric in exporting countries and explores the determinants of price volatility pass-throughs using a Glosten, Jagannathan and Runkle generalised autoregressive conditional heteroskedasticity (GJR-GARCH) model with dynamic conditional correlation (DCC) specifications. Findings indicate that causal relationships between world and local prices are bi-directional and that self-sufficiency plays an important role in reducing international price volatility spillovers. Moreover, the consumption of substitute goods such as maize or rice functions as a shock absorber, alleviating volatility transmissions from the international market. Due to the COVID-19 crisis, food prices are more destabilised in many countries, along with various factors such as Russia’s and Kazakhstan’s export restrictions on grain commodites and international transport and supply chain disruptions. Based on the findings of our analysis, high self-sufficiency or autarky policies could help resilience to the shocks from these unexpected events against local retail markets in exporting countries such as the United States.

Principales factores para la exportación de cacao orgánico producido en la provincia de Marañón - Huánuco

La presente investigación tiene como objetivo determinar cuáles son los factores claves y cómo influyen estos en la exportación de cacao orgánico en la Provincia de Marañón - Huánuco. Para tal efecto se propusieron en la hipótesis de trabajo, los siguientes factores claves: producción, asociatividad, financiamiento, tecnología, logística, marketing y precios internacionales. Se desarrolló un diseño descriptivo abordando inicialmente cada uno de los factores antes mencionados, obteniendo que la logística tiene un alto impacto debido a la deficiencia infraestructura vial de la zona, la asociatividad se constituye como una estrategia primordial para alcanzar la oferta exportable deseada, el financiamiento se transforma en un aliado para las cooperativas y/o asociaciones permitiendo hacer frente a los costos de exportación y, finalmente, las estrategias de marketing mediante la participación en ferias internacionales que permiten promocionar la marca y generar nuevos clientes. En conclusión; la logística, la asociatividad, el financiamiento, las estrategias de marketing y la producción influyen directamente en la exportación de cacao orgánico, mientras que la tecnología y la volatilidad de los precios internacionales no tienen un impacto muy significativo en el proceso de exportación.

Determinants of international price volatility transmissions: the role of self-sufficiency rates in wheat-importing countries

From the 1980s until the early 2000s, many developing governments adopted market liberalization policies due to relatively low agricultural prices and the implementation of structural programs by the IMF. Yet, a paradigm shift occurred with the emergence of the 2008 food crisis, which directed food-deficit governmental bodies to protectionist regimes supporting higher food self-sufficiency. Despite the importance of food autarky to shield domestic food markets, its effects have never been fully discussed in a formalized econometric framework. This article analyses wheat price volatility transmissions from global to local markets in 10 wheat importing countries, identifying the causality with conditional correlation functions (CCF), the degree of volatility transmissions using generalized autoregressive conditional heteroskedasticity (GARCH) models with the dynamic conditional correlation (DCC) specification and potential determinants with a panel analysis. The main findings reveal that a significant unidirectional Granger causality runs from international wheat price to local retail flour prices for wheat importing countries with an approximate five-month lag, the volatility correlations from international to local markets were strengthened around the period of the 2007–08 food crisis and a higher self-sufficiency rate plays a role in alleviating volatility passthroughs from international markets. This evidence that increasing the SSR of an agricultural commodity is effective in isolating the domestic market is valuable for policymakers in food importing countries. The primary beneficiaries of implementing the policy measure are risk-averse producers and consumers because their utility or welfare improves as the price volatility of foodstuffs declines.

Economic analysis of export performance of major Indian spices

India is often referred as the “spice hub of the world” because of its larger production and export potentiality of spices in the world. The present study examines the direction of trade of major spices export from India to different destinations during 1995-96 to 2016-17. The study utilizes Markov chain analysis and calculate the transitional probability matrices for all major spices to determine the direction of spices export from India. The total study period has been divided into two periods based on National Horticulture Mission viz., pre-NHM (1995-96 to 2005-06) and post-NHM (2006-07 to 2016-17). The study revealed that the retention capacity of export destinations for Indian chilli increased after National Horticulture Mission. However, many major importers have registered lesser retention probability in majority of spices during post-NHM period owing to the increased production in the competing countries like China, Bangladesh and Turkey. Besides this, volatility in international prices of spices has led to decrease in foreign exchange earnings from spice trade. Steps need to be taken to maintain the same level of foreign exchange earnings as before so that more new importers in the market can be reached and India should develop modern infrastructure to encash this competitive advantage.

The effects of international price volatility on farmer prices and marketing margins in cattle markets

This study examines the effects of export price volatility in cattle markets using panel data from twelve countries between 1970 and 2013. Fixed-effects models with Driscoll and Kraay standard errors were estimated to control for cross-sectional dependence. Results indicate that price transmission depends on prices previously paid to farmers, variations in export prices and volatility of export prices, which reduces farmer prices in developed countries and it increases them in developing countries. In contrast, marketing margins are reduced by contemporaneous export price volatility and are increased by previous volatility. Exporters in developing countries take more time to transmit shocks in international prices, pay lower prices to farmers and absorb a bigger proportion of price fluctuations. These price transmission imperfections affect investments, technology adoption, production level and quality across the chain in developing countries, which negatively impact farmers, input and service providers, traders and other actors of the beef cattle chain.

Subsidies for Price Risk in Grains: The Case of Maize in Mexico

Across the globe, grain farmers face considerable volatility in international prices for their harvests, now considered commodities. Several years ago, the Mexican government implemented subsidy programs to protect farmers and firms from the risks entailed in price volatility. In this article, I analyze the characteristics and limitations of these programs as well as effects on maize producers and feed enterprises in the state of Puebla, Mexico. Among the findings is the fact that while these programs offer important advantages to the participants, the buyer-seller contracts are often breached as a result of climatic disasters, differences in relative prices (international versus open market), and changes in international exchange rates. The program resources are also concentrated in the hands of a few producers and firms, as well as geographically. I reflect on the need to reorient agricultural policy in Mexico, directing the resources devoted to the government hedging strategy to less regressive programs, such as direct income support for the producer.

The Political Economy of Food Price Volatility: The Case of Vietnam and Rice

This article argues that the structure of the Vietnamese rice export system is, in political economy terms, a rational response to the volatility present in the international rice market. In particular, it is argued that the Vietnamese Food Agency, along with VINAFOOD‐1 and VINAFOOD‐2, have been structured so that they can benefit from the domestic demands for export restrictions anticipated to occur as a consequence of international price volatility and the psychological demand of consumers for price stability. In turn, the actions of these agencies also contribute to international price volatility and the resulting demand for export restrictions. Since the political and economic elite in Vietnam obtain both political and economic power from this system, it is unlikely to be replaced with more effective and efficient policies to combat domestic price volatility. Thus, continued volatility in the price of rice can be expected.

Stochastic growth, taxation policy and welfare cost in an open emerging economy

We studied the unstable tax policy effects on the welfare and growth in the emerging economies. This is in a more general approach than those of Turnovsky (Dynamic macroeconomic analysis, pp 155–211, 2003) and Hopenhayn and Maniagurria (Rev Econ Stud 63:611–625, 1996), neglecting the emergent economy structure, and only taking the tax policy at random, not establishing endogenous stochastic adjustments. Through our elaborate stochastic growth model in continuous time and simulations for small open emerging economies that imitates foreign technology, the findings are as follows: (1) the higher the initial productivity in the technology adoption sector, the weaker the tax variation needed to offset the effects of a rise in international interest and inflation rates. (2) A high volatility of international prices has a contraction effect on the foreign capital inflows, deprives the domestic agents of foreign technology and reduces the opportunities to invest in imitation. (3) The expected negative tax volatility effect on investment stops from a threshold where the income effect starts to prevailing over the substitution effect. (4) The resulting welfare cost from an unstable tax policy suggests a need for stabilisation or compensation transfers measures.

The Role of Financial Market Structure and the Trade Elasticity for Monetary Policy in Open Economies

Imperfect international risk sharing and exchange rate volatility matter for how monetary policy should optimally be conducted in an open economy through affecting policymakers’ terms of trade considerations. I study these motives for a classical and long‐standing question in international monetary economics: the size of potential gains from international policy coordination. In a relatively standard model I allow for various degrees of risk sharing by considering different assumptions on international financial markets, and a large region for the crucial parameter of the trade elasticity. When incomplete markets give rise to high volatility of international prices and poor risk sharing—such as in Corsetti, Dedola, and Leduc (2008)—gains from policy coordination are an order of magnitude larger than previous studies, working under the assumptions of complete markets, suggest.

International price volatility: Evidence from U.S. and Mexican cities

We investigate price volatility across cities in the U.S. and Mexico. We find substantial differences in volatility across types of city pairs, with unexplained price volatility exhibiting heteroscedasticity. U.S. city pairs have the lowest variance in unexplained price volatility while international city pairs have the greatest. We test whether the North American Free Tree Agreement (NAFTA) had any statistical impact on intercity price volatility and find that the impact was minor. Finally, following Engel and Rogers (1996), we find the width of the Mexico–U.S. border equivalent to adding between 3,642 and 44,765 miles of distance. However, since the NAFTA was passed the border has “shrunk” by about 5%.

Lobbying Incentives and the Pattern of Protection in Rich and Poor Countries

In seeking to explain why poor countries tend to choose policies that tax agriculture relative to manufacturing while rich countries do the opposite, archetypical parameters for a poor agrarian economy and a rich industrial one are inserted in a computable general equilibrium model to simulate the medium-term effects on income distribution of policies that distort the relative prices of tradables. The model includes a non-tradables sector and intermediate inputs, realistic features that ensure even greater skewness in the distributional effects of protection than simpler models suggest. The magnitude of the results helps explain the tendency for countries to change gradually from taxing to subsidizing agriculture relative to manufacturing as their economies develop. The paper draws out the implications of the analysis for agricultural and trade policy reform in the 1990s.(This abstract was borrowed from another version of this item.)