Inflation in developing Asia: pass‐through from global food and oil price shocks

The world economy experienced a sharp spike in food and oil prices during 2007 and 2008. In light of developing Asia's dependence on imported oil and food, we can expect higher global food and oil prices to result in higher domestic consumer prices in the region. However, the actual impact of the global commodity shocks on consumer price inflation in developing Asia depends on a number of other factors, including government policy measures. The objective of this paper is to examine empirically the extent of the pass‐through of global food and oil prices to domestic consumer prices in nine countries in the region. The main empirical result is that the magnitude of the pass‐through has been limited. Government policy measures, for example, subsidies and price controls, played a role in reducing or delaying the pass‐through of oil and food price increases to domestic prices.     

International price discrimination: The pharmaceutical industry

It is generally asserted that price discrimination is a common feature of the international pharmaceutical market, resulting in unnecessarily high medical costs to developing countries, since it is pharmaceuticals that are the largest component of their health care expenditures. However, little comprehensive empirical research has been carried out to test this hypothesis. This article compares the prices of identical packages of pharmaceutical products for 32 countries for the year 1975 and examines which factors contribute to thehuge price differences. A strong positive relationship between price level and per capita GDP is found, a 10% increase in per capita income being associated with on average 8% higher drug prices. The implementation of direct price control measures by the government results on average in a 20% price reduction, while government policies such as bulk purchasing through a centralized government agency, promotion of the use of generics and, to a lesser, extent excluding patent protection seem to be sucessful in lowering the general price level of pharmaceuticals. These results suggest that the pharmaceutical industry charges what the market “will bear”.     

国际油价波动对我国经济发展影响及对策问题研究

石油对于各国特别是工业化进程中国家的经济和社会发展起着举足轻重的作用,而近年来,国际油价的波动一直是国际经济中的敏感话题。本文分析了我国目前石油消费和进口的基本情况,并研究了国际油价的波动对我国经济发展所产生的重要影响,分别从连续上涨和连续下跌两方面所产生的影响进行研究,最后得出国际油价波动下我国经济发展的策略。     

THE VARIOUS DIMENSIONS OF COMMODITY DEPENDENCE IN AFRICA

This paper considers whether or not the poor performance of many African countries can be ascribed to a dependency on primary commodity exports. This is a multidimensional question which concerns the Prebisch‐Singer Hypothesis, commodity price volatility, the dependence of GDP on exports and the commodity price elasticity of exchange rates (the so‐called Dutch disease problem). To consider these questions, the paper uses data on 39 commodities and ten African countries. It finds that relative to the price of manufactured goods there is a downward secular trend in less than half of the commodity prices considered. Nonetheless, most commodity prices are highly volatile. Furthermore, in the case of half of the countries considered GDP is dependent on exports. However, the paper finds limited evidence for Dutch disease.     

How to Model a Child in School? A Dynamic Macrosimulation Study for Tanzania

Universal primary education is regarded as one of the key pillars of sustainable development. The positive influence of education on growth is supported by many empirical studies. However, the effects of education on labour supply, poverty reduction and welfare as well as subsistence agriculture are hardly traceable in an econometric set‐up, given the complex interactions and the long‐term nature of education. An economy‐wide dynamic simulation model provides a well‐suited toolkit to analyse the effects of increased school provision in these aspects and provides insights into the intertemporal aspects of the schooling decision of children. We develop a macroeconomic model that explicitly includes education and human capital allocation, and takes into account that the possibility of child labour increases the opportunity costs of human capital formation. In an application for Tanzania, we find that a large‐scale investment programme in education might have a negative effect on both gross domestic product (GDP) growth and high‐skilled labour supply in the short term but leads to higher GDP and welfare as well as significantly reduced child labour supply in the medium to long term.     

WhatDrives China＇s House Prices： Marriage or Money？

The high and rising house prices in China are not adequately accounted for the traditional explanations emphasizing demand‐driven or cost‐push factors. Recent published studies claim that gender imbalance increases competition among men in the marriage market, which has pushed Chinese, especially parents with a son, to buy houses as a signal of relative status in the marriage market; this marriage competition then causes high demand for houses and eventually leads to rising house prices in China. Empirical results in this paper, however, provide little support for this hypothesis and we find that a rise in the sex ratios for most age cohorts accounts for very small percentage variations in house price movements in China during 1998–2009. Further investigation suggests that excess demand driven by high monetary growth was a significant cause of the rising house prices in China during 1998–2009. Therefore, the impact of gender imbalance on house prices should not be exaggerated and monetary dynamics remains an important leading indicator for house price movements in China.     

Food crisis and export taxation: the cost of non-cooperative trade policies

This paper aims to assess the rationales for export taxes in the context of a food crisis. First, we summarize the effects of export taxes using both partial and general equilibrium theoretical models. When large countries aim to maintain constant domestic food prices, in the event of an increase in world agricultural prices, the optimal response is to decrease import tariffs in net food-importing countries and to increase export tariffs in net food-exporting countries. The latter decision improves national welfare, while the former reduces national welfare: this is the price that must be paid to keep domestic food prices constant. Small net food-importing countries are harmed by both decisions, while small net food-exporting countries gain from both. Second, we illustrate the costs of a lack of regulation and cooperation surrounding such policies in a time of crisis using a global computable general equilibrium (CGE) model, mimicking the mechanisms that appeared during the recent food price surge (2006–2008). This model illustrates the interdependence of trade policies, as well as how a process of retaliation and counter-retaliation (increased export taxes in large net food-exporting countries and reduced import tariffs in large net food-importing countries) can contribute to successive augmentations of world agricultural prices and harm small net food-importing countries. We conclude with a call for international regulation, in particular because small net food-importing countries may be substantially harmed by those policies that amplify the already negative impact of a food crisis.     

Does Bulog Stabilise Rice Prices in Indonesia? Should It Try?

The intuition of economists is likely to be a poor guide to the social value of food price stabilisation, because of problems in modelling the impact of stabilisation on consumer behaviour, producer behaviour, and the macro economy, including the impact on economic growth. The potential for stable food prices to contribute to economic growth is especially relevant to the poor countries of Asia, where rice is important in macroeconomic terms. Indonesia's experience since 1959 presents an opportunity to test hypotheses about the design, implementation, and impact on social welfare of food price stabilisation. The model presented here explains Bulog's activities, and confirms that its interventions stabilise rice prices. Should Bulog try to stabilise rice prices? The answer is a clear yes in the 1970s and 1980s, but is less clear in the 1990s as Bulog's costs have risen and the share of rice in the economy has fallen.     

Oil and gold price dynamics in a multivariate cointegration framework

This study delivers further insights into oil and gold price dynamics and their relation to U.S. prices and the dollar exchange rate. Previous studies have frequently analyzed this issue regarding the price either of gold or of oil; however, the role of both quantities has not been analyzed simultaneously in a broader context. To tackle this caveat, we use monthly data for the nominal effective dollar exchange rate, oil, gold and U.S. prices from 1976:01 to 2011:11. We carefully analyze the long-run as well as the short-run dynamics and the long-run impact in terms of shocks, applying a cointegrated VAR model. The main conclusion we reach is that although gold and oil are both important commodities, their economic impact in terms of their shocks differs significantly. In the long-run, both quantities seem to be positively related and shocks to the gold price drive the system. In addition, the gold-oil spread is positively related to U.S. consumer prices, which implies a stronger relationship of consumer prices to the former.     

Rethinking the impact of GDP on financial development: Evidence from heterogeneous panels

This paper examines the nonlinear impact of real GDP per capita on financial development in a panel of 125 countries. It also determines the moderating effect of inflation on the impact of GDP on financial development. It employs the dynamic panel system generalized method of moments (GMM) and the dynamic common correlated effects (CCE) to do both panel and country‐specific analysis, as well as control for cross‐sectional dependence, heterogeneity and endogeneity. This study shows that GDP has a positive impact on financial development in the entire panel. However, when we split the panel into different income groups, we find a positive impact in the high‐ and middle‐income groups while the impact is insignificant in the low income group. Although we find no evidence of a nonlinear impact of GDP on financial development in the panel, the country‐specific analysis reveals a significant nonlinear relationship between GDP and financial development in 73 countries. We also show that inflation adversely moderates the positive impact of GDP on financial development in middle‐income countries. This study implies that the relationship between GDP and financial development depends on the levels of GDP and inflation rate. We recommend some policy options based on the findings.     

Are Real GDP Levels Stationary in African Countries?

In this study, we apply flexible Fourier stationary unit root test proposed by Enders and Lee (2012) to assess the non‐stationary properties of the per capita real gross domestic product (GDP) for 32 African countries. We find that Fourier stationary unit root test has higher power than linear method if the true data‐generating process of per capita real GDP is in fact a stationary nonlinear process of an unknown form with structural change using the low frequency components. We investigate the stationarity of per capita real GDP from the nonlinear point of view and provide robust evidence that clearly indicates that real output is well characterised by a nonlinear, mean‐reverting process, namely Benin, Botswana, Burundi, Cameroon, Senegal, Sierra Leone and South Africa. Our evidence points that these seven countries are nonlinear stationary, implying that per capita real GDP follows a steady rate of growth, and policy innovations then have temporary effects. These results have important policy implications for African countries.     

Global food prices and monetary policy in an emerging market economy: The case of India

This paper investigates a perception in the political debates as to what extent poor countries are affected by price movements in the global commodity markets. To test this perception, we use the case of India to establish in a standard SVAR model that global food prices influence aggregate prices and food prices in India. To further analyze these empirical results, we specify a small open economy New-Keynesian model including oil and food prices and estimate it using observed data over the period 1996Q2 to 2013Q2 by applying Bayesian estimation techniques. The results suggest that a big part of the variation in inflation in India is due to cost-push shocks and, mainly during the years 2008 and 2010, also to global food price shocks, after having controlled for exogenous rainfall shocks. We conclude that the inflationary supply shocks (cost-push, oil price, domestic food price and global food price shocks) are important contributors to inflation in India. Since the monetary authority responds to these supply shocks with a higher interest rate which tends to slow growth, this raises concerns about how such output losses can be prevented by reducing exposure to commodity price shocks.     

油价波动对新疆相关行业的影响

原油作为重要的基础能源在国民经济各行业中被广泛应用。石油工业是新疆工业的第一大支柱产业,新疆石油工业总产值已占全疆GDP总量的50%以上,对整个经济的发展起着至关重要的作用。自2005年以来,我国已先后对成品油价进行八次调整,提价频率之高、上涨幅度之大,使得以石油为能源或原材料的相关行业的产品价格受到影响。本文就当前石油价格的持续上涨对新疆相关行业的影响程度进行了分析,并提出了几点对策和建议。     

COMMODITY PRICE SHOCKS AND THE AUSTRALIAN ECONOMY SINCE FEDERATION*

Australia has experienced frequent and large commodity export price shocks similar to commodity exporters in Asia, Africa, and Latin America, but this price volatility has had much more modest impact on economic performance. Why? This paper explores Australian terms of trade volatility since 1901. It identifies two major price shock episodes before the recent mining‐led boom and bust. It assesses their relative magnitude, their impact on de‐industrialisation and distribution during the booms, and the labour market and policy responses to the shocks. Australia has indeed responded differently to volatile commodity prices than have other commodity exporters.     

Reinvestigating the Oil Price–Stock Market Nexus: Evidence from Chinese Industry Stock Returns

The present study investigates the influence of international oil prices on China's stock market returns across 29 different industries. The paper attempts to account for any structural breaks and nonlinearity in this relationship. The results reveal that the effect of changes in the international price of oil on stock returns differs substantially across industries. The stock returns of the coal, chemical, mining and oil industries are found to be positively affected by crude oil price movements. Conversely, electronics, food manufacturing, general equipment, pharmaceuticals, retail, rubber and vehicle industries are found to be negatively affected by movements in the price of crude oil. The results of the estimations also suggest that the majority of Chinese industries have been significantly affected by oil prices since 2004. The influence of international oil prices on Chinese stocks also has a stronger effect in the presence of high volatility but the effect varies across industries.     

金融危机背景下石油价格波动对我国经济影响实证分析

通过选取我国宏观经济数据中反映消费、投资、贸易、价格水平四方面22个经济指标数据,运用因子分析法提取主因子,之后采用VAR模型,分析我国石油价格波动对宏观经济产生的影响。结果表明:贸易对石油价格的变化最为敏感,前期的波动较大;石油价格上涨对消费存在逆向影响,随着价格上涨消费的变化达到低点后缓慢回升;石油价格上涨对物价水平和投资的影响相对不明显。     

THE GENERATIVE POWER OF AIR FREIGHT IN THE TRADE OPENNESS – ECONOMIC GROWTH NEXUS IN AFRICAN COUNTRIES

Foreign trade matters considerably more than ever in today's integrated economies, and the wealth of benefits afforded by air transport is one of the cornerstones of international trade. Therefore, to shed light on the precise role of air cargo, seen as an important motor of growth, this paper provides an empirical model to examine the relationships among trade openness, air freight volume and GDP per capita using panel cointegration techniques for a sample of Economic Commission for Africa (ECA) countries during the 1970‐2002 period. The analysis substantiates that there are cointegrated relationships among the three variables and that they are bound together in a long‐run equilibrium. Furthermore, evidence from fully modified Ordinary Least Squares panel estimations also indicates that positive trade and air freight shocks contribute to real GDP per capita. In addition, improvements in air cargo services are accompanied by an increase in trade openness in ECA countries and vice versa. These results underscore the important role of air freight and demonstrate that it should not have been overlooked in earlier studies. Finally, the empirical findings have important policy implications for our sample countries.     

A comparative analysis of monetary responses to global oil price changes: net oil producing vs. net oil consuming countries

In this paper, we examine monetary responses to global oil price changes across a panel of seven major net oil consuming countries and three major net oil producing countries using monthly data from January 1986 to August 2013. Employing a variety of linear and nonlinear causality tests, our main findings are as follows. First, oil price movements directly affect monetary aggregates in both net oil consuming and net oil producing countries. Second, nonlinear causality tests reveal strong causal influences from oil prices to monetary aggregates. Third, nonlinear parametric and nonparametric models reveal oil price changes account for significant changes in monetary aggregates in Denmark, Germany, the Netherlands, and the US among net oil consuming countries and in Canada and Mexico among net oil producing countries. Finally, monetary aggregates in these countries respond nonlinearly only to oil price increases.     

Food Price Crisis,Poverty, and Inequality

This paper simulates how a doubling of food prices affects absolute poverty and the food‐price‐adjusted real income distribution. We assume unsubsidized world food prices in order to derive the cost of poverty deepening and poverty expansion. We also estimate the degree to which inequality increases if no measures are put in place to offset rising food prices. Both measures are vulnerability indicators useful for social policy planning. Our results show that low‐income countries experience dramatic increases in absolute poverty as a result of doubling food prices. Middle‐income countries experience the greatest decrease in absolute income, which contributes most to an increase in world income inequality. The paper estimates that the global dollar value of the absolute poverty gap ($1.25/day) has the potential to increase by 400%, with poverty deepening accounting for two thirds of the increase.     

The impact of world oil price shocks on macroeconomic variables in Vietnam: the transmission through domestic oil price

This study examines the impact of world oil price shocks on macroeconomic variables in Vietnam with a focus on the transmission channel of domestic oil prices. The Structural Vector Autoregression model with two blocks of real economy variables and monetary variables is employed. The world oil price follows an autoregressive process to reflect the exogenous nature of world oil price shocks to the domestic economy. The retail domestic oil price is determined simultaneously by only the world oil price due to the government's control of the domestic oil market. Using monthly data in the period between 2009 and 2021, the study indicates that a positive shock to world oil prices will increase the domestic oil prices significantly, industrial production (slightly and only statistically significant in the third month after), and inflation (significantly in 8 months). Besides, the domestic oil price is not the only transmission channel of world oil price shocks to the economy. This result implies forecasting, assessing, and controlling the impact of the world oil price shock on the economy should focus on both domestic oil prices and other indirect channels.