Dynamic Shocks of Crude Oil Price and Exchange Rate on Food Prices in Emerging Countries of Southeast Asia: A Panel Vector Autoregression Model
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Keywords

Oil price, Food price, Exchange rate, Southeast Asian countries, Panel VAR, Impulse response function, Variance decomposition.

Abstract

This paper empirically analyzes food price responses to shocks from crude oil price and exchange rate volatility in five emerging Southeast Asian nations between 2000 and 2020 using impulse response functions and variance decomposition analysis of the dynamic panel Vector Autoregression approach. Based on the findings of the impulse response functions analysis, food prices respond positively to both oil price and exchange rate shocks. Meanwhile, the results of variance decomposition analysis show that food prices account for a significant portion of volatility in its own shock. The contribution of oil price shock to food price volatility is found to be greater than the contribution of exchange rate shock. Hence, the study recommends that policymakers in these nations should be vigilant about the impacts of oil price and exchange rate shocks on food prices since these factors may undermine price stability and exacerbate food security.

https://doi.org/10.55493/5009.v10i2.4517
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