Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/106611
Authors: 
Kalkuhl, Matthias
Year of Publication: 
2014
Series/Report no.: 
ZEF Discussion Papers on Development Policy 191
Abstract: 
This paper analyzes the transmission from global commodity to domestic food prices for a large set of countries. First, a theoretical model is developed to explain price transmission for different trade regimes. Drawing from the competitive storage model under rational expectations, it is shown that domestic prices can respond instantaneously to global prices even if no trade takes place but future trade is expected. Using a global database on food prices, we construct national and international grain price indices. With an autoregressive distributed lag model, we empirically detect countries in which food prices are influenced by global commodity prices, including futures prices. Mapping transmission elasticities with the size of the population below the poverty line which spends typically a large share of its income on food, we are able to estimate the size of vulnerable population. Our empirical analysis reveals that 90 percent of the global poor (income below 1.25$/day) live in countries where domestic food prices respond to international prices - but the extent of transmission varies substantially. For 360 million poor people, international prices transmit to their country at rates of 30 percent or higher within three months.
Subjects: 
time series econometrics
poverty
trade
storage
market integration
volatility
shocks
price indices
JEL: 
C22
E3
F1
F6
Q1
Document Type: 
Working Paper

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