The Nature of Food Commodity Prices Volatility in Driving Inflation and Policy
Abstract
The objective of research is to analyze the volatility effect of food commodity prices and whether surging food commodity prices have spilled over into food inflation and total inflation with time series data through Box-Jenkins method for 12 food commodity prices. The results have proved that only beef price had high volatility effects and have asymmetric effect. While, soybeans, cooking oil, and food are vulnerable but did not have volatility effects. The change in food commodity prices are significant drive the inflation in the long-term although in the short-term insignificant. The government needs to overcome the full transmission effect of an exogenous shock and to introduce economic reform through investment, infrastructure, and markets for corn and egg for food inflation; eggs and peanuts for total inflation. Besides, strong second-round effects of higher commodity prices on inflation have generally been absent converged to core inflation.
Keywords
References
Acquah, H. D. & O. Rebecca. (2012). Spatial Market Integration and Price Transmission of Selected Plantain Markets in Ghana. Journal of Sustainable Development. Vol. 14: 208-217.
Akpan, S. B. et.al. (2016). Nature of Price Adjustment and Market Integration among Stages in Cassava Value Addition Chain in Southern Nigeria. Journal of Social Sciences. Vol. 12(1): 27.35.
Altissimo, F. et.al. (2005). Inflation Persistence and Price Setting Behaviour in the Euro Area. Frankfurt, Germany: European Central Bank (ECB).
Angeloni, I. et.al. (2006). New Evidence on Inflattion Persistence and Price Stickiness in The Euro Area: Implication for Macro Medellings. Journal of the European Economic Association. Vol. 4(2–3): 562–574.
Bakucs, Z. et.al. (2014). Does Market Structure Influence Price Transmission in the Agro-food Sector? A Meta-analysis Perspective. Journal of Agricultural Economics. Vol. 65(1): 1-25.
Blanchard, O. & J. Gali. (2007). The Macroeconomic Effects of Oil Price Shocks: Why are they So Different from the 1970s? NBER Working Paper No. 13368.
Cecchetti, S & R Moessner. (2008). Commodity prices and inflation dynamics. BIS Quarterly Review, December.
Davis, J. (2011). Agricultural price volatility and its impact on government and farmers: a few observations. OECD Agricultural Price Volatilities Conference: G20 Outreach, June 14-15 (pp. 1-17). Paris: UNCTAD.
Drobetz, W. & G. Wanzenried. (2006). What Determines the Speed of Adjustment to the Target Capital Structure? Applied Financial Economics. Vol. 16(13): 941-958.
Dwyer, A. et.al. (2011). Global Commodity Markets – Price Volatility and Financialisation. Bulletin of Reserve Bank of Australia. June Quarter 2011: 49-58.
Engle, R. (2002). New Frontiers for ARCH Models. Journal of Applied Econometrics. Vol. 17: 425-446.
EU-Commission. (2008). Is there a Speculative Bubble in Commodity Markets? Brussels: Commission Staff Working Document, Task force on the role of speculation in agricultural commodities price movements, SEC(2008)2971, 3, 1.
Farooki, M. & R. Kaplinsky. (2012). The Impact of China on Global Commodity Prices: The Global Reshaping of The Resource Sector. New York: Routledge .
Ferrucci, G. et.al. (2012). Food Price Transmission in the Euro Area: The Role of Asymmetries and Non-Linearities. International Journal of Central Banking. Vol. 8: 179-217.
Hassan, S. A. & H. Regassa. (2012). Asymmetric Behavior of Volatility in Gasoline Prices Across Different Regions of the United States. Journal of Finance and Accountancy. Vol. 10: 1-9.
IMF. (2008). Is Inflation Back? Commodity Prices and Inflation, Chapter 3 World Economic Outlook. Washington: International Monetary Fund.
Jacks, D. S. et.al. (2011). Commodity Price Volatility and World Market Integration Since 1700. The Review of Economics and Statistics. Vol. 93(3): 800-813.
Jacquet, P. (2011). Improving risk management to cope with food price volatility and promote agricultural development: G20 mission on addressing the effects of price volatility, Interim recommendations . The National Food Security Mission (NFSM).
Juanda, B. & Junaidi. (2012). Ekonometrika Deret Waktu: Teori dan Aplikasi. Bogor: IPB Press.
Keay, I. (2010). The Impact of Commodity Price Volatility on Resource Intensive Economies. Ontario, Canada: Queen’s Economics Department Working Paper No. 1274.
Lanza, A. (1991). Speed of Adjustment and Market Structure: A Study of the Gasoline Market in Germany. London: Oxford Institute for Energy Studies.
Liu, Z. & J. Weidner (2011). Does Headline Ination Converge to Core?" FRBSF Economic Letter.
Meyer, J. & S.V. Cramon-Taubadel. (2004). Asymmetric Price Transmission: A Survey. Journal of Agricultural Economics. Vol. 55: 581-611.
Nsouli, S. M. et.al. (2002). The Speed of Adjustment and the Sequencing of Economic Reforms: Issues and Guidelines for Policymakers. IMF.
Peltzman, S. (2000). Prices Rise Faster than They Fall. Journal of Political Economy, 108, 466-502.
Pindyck, R. S. (2004). Volatility and Commodity Price Dynamics. The Journal of Futures Markets. 24(11): 1029–1047.
Rayner, V., Laing, E., & Hall, J. (2011, March). Developments in. RBA Bulletin, 15–21.
Regnard, N. & J.M. Zakoïan. (2011). A Conditionally Heteroskedastic Model with Time-varying Coefficients for Daily Gas Spot Prices. Energy Economics. Vol. 33(6): 1240-1251.
Santoso, T. (2011). Aplikasi Model GARCH Pada Data Inflasi Bahan Makanan Indonesia. Aset. Vol. 13 (1): 65-76.
Schutter, O. D. (2010). Food Commodities Speculation and Food Price Crises: Regulation to reduce the risks of price volatility. Briefing Note 02. United Nations Special Rapporteur on The Right to Food: 1-14.
Sholelah, F.H. (2016). Pengaruh Volatilitas Harga Terhadap Inflasi Bahan Makanan di Kota Malang. (Unpublished Thesis). Malang: Universitas Brawijaya.
Vavra, P. & B.K. Goodwin. (2005). Analysis of Price Transmission along the Fod Chain. OECD Food, Agriculture and Fisheries Working Papers, No.3.
Von Braun, J. & G. Tedesse. (2012). Global Food Price Volatility and Spikes:An Overview of Costs, Causes, and Solutions. ZEF-Discussion Papers on Development Policy No. 161. Bonn: The Center For evelopment Research (ZEF).
Zoli, E. (2009). Commodity Price Volatility, Cyclical Fluctuations, and Convergence: What is Ahead for Inflation in Emerging Europe? IMF Working Paper WP/09/41. International Monetary Fund (IMF).
DOI: 10.15408/sjie.v6i1.4523
Refbacks
- There are currently no refbacks.
