Evaluating the Causes of Rising Food Prices in Low and Middle Income Countries

Abstract

The effects of population, income, prices of major inputs, and exchange rate of the U.S. dollar on the prices of three key agricultural and food commodities (feed grains, oilseed, and fruits) for 13 low-income countries and seven middle-income countries were evaluated. Given the short time period, a modified seeming unrelated regression-vector autoregressive model that incorporates the lagged exogenous variables property of time series models and the system of equation estimation is employed in the analysis. The study finds no single factor that persistently explains all soaring food prices as reported in the literature. The only factor that persistently explains soaring food prices are the contemporaneous and one-year lagged exchange rates and income.