Modelling the symmetrical and asymmetrical effects of global oil prices on local food prices: A MENA region application

Hadj cherif, Houda; Chen, Zhenling; Ni, Guohua

Modelling the symmetrical and asymmetrical effects of global oil prices on local food prices: A MENA region application

2021

Hadj cherif, Houda | Chen, Zhenling | Ni, Guohua

This paper explores the complex nexus between the global oil prices and the food prices of the Middle East and North Africa (MENA) region during the period 2000–2020. Both linear and nonlinear models of the autoregressive distributed lag (ARDL) approach are adapted into panel data form to investigate the symmetrical and asymmetrical influence of oil prices on food prices. The key results are summarized: (i) the long-term effect of oil prices on food prices is significantly positive including both oil-exporting and oil-importing nations. The positive impact on oil exporters—due to higher oil revenues—is greater than importing nations, leading to an increased demand for food. Additionally, the effect on oil exporters is negative and significant in the short term but not significant for importers. (ii) The nonlinear ARDL panel analysis for the whole MENA sample confirms the presence of negative short-term asymmetric behaviour due to the heterogeneous response within the oil-importing and oil-exporting samples, while in the long term, the asymmetric effect is positive, indicating that food prices increase regardless of fluctuations in oil prices. (iii) The nonlinear ARDL results using time series affirm the absence of an asymmetric nexus among oil and food prices for some oil-exporting nations (including Kuwait, Saudi Arabia, United Arab Emirates) and Tunisia within the oil-importing group. However, the food prices of other countries are asymmetric to the oil price. This study provides recommendations that are useful to MENA countries to establish a stable mechanism for oil and food prices to ensure food security in the region.

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