Volatility Linkages Between Energy and Food Prices: Case of Selected Asian Countries
Taghizadeh-Hesary, Farhad; Rasoulinezhad, Ehsan; Yoshino, Naoyuki | March 2018
Abstract
This study examines the linkages between energy price and food prices over the period 2000–2016 by using a Panel-VAR model in the case of eight Asian economies, namely Bangladesh, the PRC, Indonesia, India, Japan, Sri Lanka, Thailand, and Viet Nam. Our results confirm that energy price (oil price) has a significant impact on food prices. According to the results of impulse response functions, agricultural food prices respond positively to any shock from oil prices. Furthermore, the findings from variance decomposition reveal that shares of oil prices in agricultural food price volatilities are the largest. In the second period 4.81%, and in the 20th period 62.49%, of food price variance is explained by oil price movements. The paper opens up new policy insight. Since inflation in oil price is harmful for food security, particularly in vulnerable economies, it would be necessary to diversify the energy consumption in this sector, from too much reliance on fossil fuels to an optimal combination of renewable and nonrenewable energy resources. In addition, the paper found that the impact of biofuel prices on food prices is statistically significant but explains less than 2% of the food price variance. However, by increasing the demand for biofuel, especially in advanced countries, there should be more concern about the global increase in agricultural commodities prices and endangering food security, especially in vulnerable economies.
Citation
Taghizadeh-Hesary, Farhad; Rasoulinezhad, Ehsan; Yoshino, Naoyuki. 2018. Volatility Linkages Between Energy and Food Prices: Case of Selected Asian Countries. © Asian Development Bank Institute. http://hdl.handle.net/11540/8113.Keywords
Macroeconomic
Macroeconomic Analysis
Macroeconomic Framework
Macroeconomic Models
Macroeconomic Performance
Macroeconomic Planning
Macroeconomic
Policies
Macroeconomic Reform
Macroeconomic Stabilization
Oil and Gas Industry
Development cooperation
Petroleum Industry
Transport Industry
Social condition
Economic dependence
Economic assistance
International monetary relations
International monetary relations
International trade
National accounting
Market
Petroleum Refineries
Petroleum Products
Petroleum Prices
Petroleum
Crude Oil
Petrochemical Industry
Export Oriented Industries
Exchange
Exchange rates
Comparative economics
Index number
Monetary policy
Value analysis
Adjustment cost
Transaction cost
Conditionality
International relations
Oil refineries
Gasoline
Oil
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