Quantifying the impact of Ramadan on global raw sugar prices

Abstract

Purpose The purpose of this study is to quantify the impact of Ramadan on both the level and the growth of global raw sugar price. Design/methodology/approach The study uses a dummy and a fractional variable to capture Ramadan to overcome the asynchronicity of time between Ramadan fasting (which is based on the Islamic lunar calendar) and the movement in prices (which follows the Gregorian solar calendar). To capture the seasonality of sugar production, the data on sugar price span 34 years so that the Islamic calendar makes a complete cycle of the Gregorian calendar. The empirical model is estimated using both autoregressive integrated moving average model and unobserved components model. Findings The results show that monthly raw sugar prices in the global market increases by roughly 6.06 per cent (or $17.78 per metric ton) every year ahead of Ramadan. Practical implications The study illustrates the implications of the results for the consumption of imported sugar in Bangladesh. Originality/value The study uses a broader set of Ramadan indicators in its empirical models and checks the robustness of its baseline model using the unobserved components model. It also performs seasonal unit root tests on the global raw sugar prices.