THE IMPACT OF MACROECONOMIC UNCERTAINTY AND OIL  PRICES ON FOOD PRICES: EMPIRICAL EVIDENCE FROM SERBIA

Zorica Mladenović; Emilija Milošević

doi:10.59267/ekoPolj2501271M

Authors

Zorica Mladenović Faculty of Economics and Business, University of Belgrade, Belgrade, Serbia https://orcid.org/0000-0003-1579-4205
Emilija Milošević Faculty of Economics and Business, University of Belgrade, Belgrade, Serbia https://orcid.org/0000-0001-8980-3608

DOI:

https://doi.org/10.59267/ekoPolj2501271M

Keywords:

food prices, macroeconomic uncertainty, oil prices, cointegration analysis, SVAR model

Abstract

The purpose of the paper is to investigate the impact of crude oil prices and domestic macroeconomic uncertainty on food prices in Serbia over the period 2007-2022. The methodological framework is based on cointegration analysis and the structural vector autoregressive model. The empirical results indicate significant and positive long term effects of uncertainty and oil prices on food prices. Over a one-year horizon, about one-third of the fluctuations in food prices can be attributed to the variability of shocks in uncertainty and oil prices, while their relative influence is slightly more than half after two years. The impact of uncertainty on food price variability peaks within six months, after which its influence diminishes. In contrast, the impact of oil prices gradually increases and becomes the dominant factor in the variability of food prices after a year and a half.

Downloads

References

Adeosun, O. A., Olayeni, R. O., Tabash, M. I., & Anagreh, S. (2023). Revisiting the oil and food prices dynamics: A time varying approach. Journal of Business Cycle Research, 19, 275-309.

Bachmann, R., Elstner, S., & Sims, E. R. (2013). Uncertainty and economic activity: Evidence from business survey data. American Economic Journal: Macroeconomics, 5, 217-249.

Baker, S. R., Bloom, N., & Davis, S. J. (2016). Measuring economic policy uncertainty. The quarterly journal of economics, 131, 1593-1636.

Baumeister, C., & Kilian, L. (2014). Do oil price increases cause higher food prices?. Economic Policy, 29, 691-747.

Ben Haddad, H., Mezghani, I., & Gouider, A. (2021). The dynamic spillover effects of macroeconomic and financial uncertainty on commodity markets Uncertainties. Economies, 9, 91.

Bloom, N. (2009). The impact of uncertainty shocks. Econometrica, 77, 623-685.

Bloom, N. (2014). Fluctuations in uncertainty. Journal of economic Perspectives, 28, 153-176.

Chen, D., Gummi, U. M., Lu, S., & Hassan, A. (2024). Oil price, economic policy uncertainty and food prices in oil-exporting and oil-importing developing economies. Economic Change and Restructuring, 57, 151.

Chen, D., Gummi, U. M., Lu, S. B., & Mu’azu, A. (2020). Modelling the impact of oil price fluctuations on food price in high and low-income oil exporting countries. Agricultural Economics/Zemedelska Ekonomika, 66. 458–468.

Cho, J.S., Greenwood-Nimmo, M., & Shin, Y. (2023). Recent developments of the autoregressive distributed lag modelling framework. Journal of Economic Survey, 37. 7-32.

Ciaian, P. (2011). Food, energy and environment: Is bioenergy the missing link?. Food Policy, 36, 571-580.

De Hoyos, R. E., & Medvedev, D. (2011). Poverty effects of higher food prices: a global perspective. Review of Development Economics, 15, 387-402.

European Central Bank (2024). Economic Bulletin, Issue 2/2024. European Central Bank. https://www.ecb.europa.eu/press/economic-bulletin/html/eb202402.en.html

Fowowe, B. (2016). Do oil prices drive agricultural commodity prices? Evidence from South Africa. Energy, 104, 149-157.

Frimpong, S., Gyamfi, E. N., Ishaq, Z., Kwaku Agyei, S., Agyapong, D., & Adam, A. M. (2021). Can global economic policy uncertainty drive the interdependence of agricultural commodity prices? Evidence from partial wavelet coherence analysis. Complexity, 2021, 8848424.

Joëts, M., Mignon, V., & Razafindrabe, T. (2017). Does the volatility of commodity prices reflect macroeconomic uncertainty?. Energy Economics, 68, 313-326.

Jurado, K., Ludvigson, S. C., & Ng, S. (2015). Measuring uncertainty. American Economic Review, 105, 1177-1216.

Kilian, L. (2013). Structural Vector Autoregressions. In N. Hashimzade and M.A. Thornton (Eds.), Handbook of Research Methods and Applications in Empirical Macroeconomics (pp. 515-554). Cheltenham, UK, Edward Elgar.

Kilian, L. & Lutkepohl, H. (2017). Structural Vector Autoregressive Analysis, Cambridge University Press, New York.

Long, S., Li, J., & Luo, T. (2023). The asymmetric impact of global economic policy uncertainty on international grain prices. Journal of Commodity Markets, 30, 100273.

National Bank of Serbia (2023). Inflation report February. National Bank of Serbia. Belgrade. Serbia. https://www.nbs.rs/export/sites/NBS_site/documentseng/publikacije/ioi/izvestaji/inflation_report_02_2023.pdf

Nazlioglu, S., Erdem, C., & Soytas, U. (2013). Volatility spillover between oil and agricultural commodity markets. Energy Economics, 36, 658-665.

Nazlioglu, S., & Soytas, U. (2011). World oil prices and agricultural commodity prices: Evidence from an emerging market. Energy Economics, 33, 488-496.

Ozturk, E. O., & Sheng, X. S. (2018). Measuring global and country-specific uncertainty. Journal of international money and finance, 88, 276-295.

Pesaran, M.H., Shin, Y., & Smith, R. J. (2001). Bounds Testing Approaches to the Analysis of the Level Relationship, Journal of Applied Econometrics, 16, 289-326.

Rossi, B., & Sekhposyan, T. (2015). Macroeconomic uncertainty indices based on nowcast and forecast error distributions. American Economic Review, 105, 650-655.

Serra, T., Zilberman, D., Gil, J. M., & Goodwin, B. K. (2011). Nonlinearities in the US corn‐ethanol‐oil‐gasoline price system. Agricultural Economics, 42, 35-45.

Shin, Y., Yu. B., & Greenwood-Nimmo, M. (2014). Modelling asymmetric cointegration and dynamic multipliers in nonlinear ARDL framework. In W. Horrace & R. Sicklers (Eds.). Festschrift in Honor of Peter Schmidt: Econometric methods and applications (pp. 281-314) New York, NY: Springer.

Statistical Office of the Republic of Serbia (2022). Household budget Survey. Statistical Office of the Republic of Serbia. Belgrade. Serbia. https://publikacije. stat.gov.rs/G2023/PdfE/G20235699.pdf

Šoškić, D. (2015). Inflation impact of food prices: Case of Serbia. Economics of Agriculture, 62, 41-51.

Tiwari, A. K., Khalfaoui, R., Solarin, S. A., & Shahbaz, M. (2018). Analyzing the time-frequency lead lag relationship between oil and agricultural commodities. Energy Economics, 76, 470–494.

Wen, J., Khalid, S., Mahmood, H., & Zakaria, M. (2021). Symmetric and asymmetric impact of economic policy uncertainty on food prices in China: A new evidence. Resources Policy, 74, 102247.

Zmami, M., & Ben-Salha, O. (2019). Does oil price drive world food prices? Evidence from linear and nonlinear ARDL modeling. Economies, 7, 12.