Transmission of Global Commodity Prices to Domestic Producer Prices: A Comprehensive Analysis
July 31-August 2, 2016
Boston, MA, United States
Utilizing a comprehensive dataset that includes a sample of 104 countries for corn, 54 countries for soybeans, 82 countries for wheat, and 77 countries for rice and covers the period from 1991 to 2013, we estimate a globally comprehensive but heterogeneous (country-specific) transmission elasticities between international prices and domestic producer prices. We mainly utilize the traditional two-step Engel-Grange cointegration model and the recently developed nonlinear autoregressive distributed lags (NARD) model to estimate the transmission elasticities. We find mixed evidence on the existence of long-run relationship between international and domestic price. For corn 66 out of 104, for soybeans 27 out of 54, for wheat 47 out of 82, and for rice 49 out of 77 countries, we fail to have a long-run relationship. For corn and soybeans, the long-run relationship is evident in top producing countries whereas the converse is evident for wheat and rice, particularly for rice. We also find that the pass-through of international to domestic prices is asymmetric in the majority cases—these asymmetries are negative, i.e., the domestic producer prices react less fully to an increase in international prices than to a decrease and are acute in the short-run than the long-run. We also estimate the cropspecific short-run global mean transmission elasticities, which vary from 0.358 (corn) to 0.524 (soybeans).
Copyright 2016 by Md Zabid Iqbal and Bruce A. Babcock. All rights reserved. Readers may make verbatim copies of this document for non-commercial purposes by any means, provided that this copyright notice appears on all such copies.
Md Zabid Iqbal and Bruce A. Babcock
Iqbal, Md Zabid and Babcock, Bruce A., "Transmission of Global Commodity Prices to Domestic Producer Prices: A Comprehensive Analysis" (2016). Economics Presentations, Posters and Proceedings. 33.