Regional food price inflation transmission
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Understanding to what extent and speed agricultural commodity price changes on international markets are transmitted to consumers is key in assessing the vulnerability of households to price shocks. The importance of these transmission measures is compounded, in developing countries, by the fact that consumers tend to spend a higher proportion of their income on food items. Regional estimates of food inflation transmission can also be used to predict consumer-level impacts of international price shocks, contributing to improve the information basis on which to base policy mitigation actions and to focus on the areas likely to suffer the most. The aim of this paper is to provide measures of the transmission of price changes from international commodity markets to consumers in different regions of the world, using monthly data from FAO’s Food Price Indices and Regional Food Consumer Price Indices. This econometric analysis, which uses impulse response functions from error-correction mode ls, is useful in establishing typologies of regions with respect to the extent and speed of price transmission processes.