Agric. Econ. - Czech, 2020, 66(10):458-468 | DOI: 10.17221/197/2020-AGRICECON

Modelling the impact of oil price fluctuations on food price in high and low-income oil exporting countriesOriginal Paper

Ding Chen1,2, Umar Muhammad Gummi ORCID...*,1,3, Shan-Bing Lu4, Asiya Mu'azu3
1 School of Economics and Management, Xi'an Shiyou University, Xi'an, China
2 Department of Economics, University of Kansas, Lawrence, Kansas, United States
3 Department of Economics, Sokoto State University, Sokoto, Nigeria
4 Institute of Silk Road, Northwest University, Xi'an, China

Oil exporting economies were the most hit by the recent oil price shock that spills on the food market in an increasingly volatile macroeconomic environment. This paper examines and compares sub-samples [before crisis (2000 Q1-2013 Q1) and during crisis (2013 Q2-2019 Q4)] as to the impact of oil price on food prices in high- and low-income oil-exporting countries. We found an inverse relationship between oil and food prices in the long run based on full samples and sub-samples in high-income countries. The story is different during the crisis period: in low-income countries and all the countries combined, oil and food prices co-move in the long run as measured by the Fully Modified Ordinary Least Squares (FMOLS) and Dynamic Ordinary Least Squares (DOLS). Our findings suggest that economic structure and uncertain events (crises) dictate the behaviour and relationship between food and oil markets. Food and oil prices may drift away in the short-run, but market forces turn them toward equilibrium in the long-run. Moreover, low-income countries are indifferent in both periods due to limited capacity to balance the increasing demand for and supply of food items.

Keywords: Dynamic Ordinary Least Squares (DOLS); Fully Modified Ordinary Least Squares (FMOLS); food price; oil price

Published: October 31, 2020  Show citation

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Chen D, Gummi UM, Lu S, Mu'azu A. Modelling the impact of oil price fluctuations on food price in high and low-income oil exporting countries. Agric. Econ. - Czech. 2020;66(10):458-468. doi: 10.17221/197/2020-AGRICECON.
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