Commodity prices, inflation and inflation uncertainty among emerging economies

Abstract

Purpose This paper examines the role price fluctuations associated with internationally traded commodities play in inflationary conditions and inflation uncertainty among economies in Sub-Saharan Africa. Design/methodology/approach Using a panel 32 countries from the sub-region from 1996 to 2019, this study employed Two-Step System Generalized Method of Moments (GMM) estimation technique in its analysis. Findings Empirical evidence demonstrates that fluctuations in forex-adjusted price of crude oil, gold and cocoa have significant positive impact on inflation while forex-adjusted changes in price of cotton tend to have significant negative influence on consumer price inflation among economies in the sub-region. Additionally, the study found that gold, cocoa and cotton price changes on the international market have significant positive impact on inflation uncertainty in the sub-region (rise in price leads to increase rate of inflation uncertainty). Furthermore, improved regulatory quality and growth in output growth (GDP per capita growth) were found to help in stabilizing inflation uncertainty (reduce inflation uncertainty) among economies in the sub-region during periods of persistent growth in general price levels. Originality/value The study present a different approach based on individual economy forex-adjusted global prices of internationally traded commodities instead of general prices often used in the literature and assessed the effects such adjusted commodity prices have on inflation and inflation uncertainty. Additionally, the moderating role of regulatory quality and output growth between surmised nexuses are also examined.