Cereal Price Transmission from International to Domestic Markets in Africa
Introduction Motivated by the recent peaks in international food prices, we conducted a study to improve our understanding of the extent and speed of transmission of international cereal price changes to the domestic retail and wholesale level in developing and emerging countries (Greb et al., 2012). Other than most recent studies on world-to-domestic price transmission (PT) we attempted to extract general lessons about the drivers of PT by estimating PT processes with a consistent set of price data (Food and Agriculture Organization of the United Nations Global Information and Early Warning System – FAO GIEWS) for a large number of countries using a uniform methodology. Based on this report, we use this study to set the focus specifically on PT results for African countries, which differ significantly from those in other regions or continents. In the sample, 35 of the 71 countries are in Africa and also roughly half of the 499 domestic price series. The study has the following structure. In next section, we give a brief overview of the vector error correction model that we used for estimating our sample of measures of cereal PT. In the third section, we describe how we used the GIEWS dataset and present the results of African price pairs for each cereal product and before and after a structural break in July 2007. In a subsequent meta-regression analysis, in the fourth section we measure how much of the variation in the resulting samples of PT estimates can be attributed to factors that might be expected to influence the strength of PT. This is followed by a discussion of the results and the conclusion.