Denis WAİSWA

461123

Role of macroeconomic indicators in Uganda’s food price inflation: a VECM approach

Role of macroeconomic indicators in Uganda’s food price inflation: a VECM approach

This study was conducted to empirically examine the potential impact of macroeconomic indicators such as exchange rate, GDP, money supply, and food exports on Uganda’s food price inflation. The study employed the Johansen cointegration analysis and VEC model using quarterly data from 2000Q1 to 2022Q1. Outcomes of the analysis show that all variables are positive and statistically significant in influencing food prices in the long run except GDP which was negative and significant. However, in the short run, only GDP and the lag of food CPI were significant and influenced food prices positively. Based on the variance decomposition analysis and the very low R-squared value (0.2493), it can be concluded that food prices in Uganda are greatly influenced by factors other than macroeconomic indicators. These factors include changes in the weather pattern which lead to low food supplies, price transmission effects of rising food and fuel prices in the international markets, increased domestic food demand, and higher costs of imported production inputs. Therefore, while it is necessary to recognize the role of macroeconomic indicators in food price inflation, it is equally important to emphasize the role played by these other factors in determining food prices in Uganda for effective policy implementations.
Keywords:

Macroeconomic indicators, food price inflation, unit root, VECM Johansen cointegration,

PDF

___

  • Abbott, P., & Borot de Battisti, A. (2011). Recent global food price shocks: Causes, consequences and lessons for African governments and donors. Journal of African Economies, 20(1), i12-i62. DOI:10.1093/jae/ejr007
  • Abdullah, M., & Kalim, R. (2012). Empirical analysis of food price inflation in Pakistan. World Applied Sciences Journal, 16(7), 933-939.
  • Agbonlahor, O. (2014). The impact of monetary policy on the economy of the United Kingdom: A Vector Error Correction Model (VECM). European Scientific Journal, 10(16), 19-42.
  • Azeem, M. M., Munawwar, S., & Mushtaq, K. (2012). An empirical analysis of factors affecting food (wheat) inflation in Pakistan. Pak. J. Agri. Sci, 49(2), 199-203.
  • Baek, J., & Koo, W. W. (2010). Analyzing factors affecting US food price inflation. Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, 58(3), 303-320. DOI:10.1111/j.1744-7976.2010.01186.x
  • Banse, M., Nowicki, P., & van Meijl, H. (2008). Why are current world food prices so high? (Vol. 40): LEI Wageningen UR.
  • Benson, T., Mugarura, S., & Wanda, K. (2008). Impacts in Uganda of rising global food prices: the role of diversified staples and limited price transmission. Agricultural Economics, 39, 513-524.
  • Dickey, D. A., & Fuller, W. A. (1979). Distribution of the estimators for autoregressive time series with a unit root. Journal of the American statistical association, 74(366a), 427-431. doi:https://doi.org/10.1080/01621459.1979.10482531
  • FAO. (2022). Food and Agriculture Organization of the United Nations Data (FAOSTAT). Retrieved from: http://www.fao.org/faostat/en/#data. Accessed on: April 28, 2022
  • FAO. (2022b). FAO Food Price Index. Retrieved from: https://www.fao.org/worldfoodsituation/foodpricesindex/en/. Accessed on: April 27, 2022
  • FAO. (2022c). Food Price Monitoring and Analysis (FPMA) Bulletin 10 March 2022, Monthly report on food price trends. Retrieved from: https://www.fao.org/giews/food-prices/home/en/. Accessed on: May 20, 2022
  • FEWS-NET. (2022a). Famine Early Warning Systems Network, Uganda, Key Message Update: Below-average rainfall likely to impact production and reduce expected improvements in food security. Retrieved from: https://reliefweb.int/sites/reliefweb.int/files/resources/Uganda%20-%20Key%20Message%20Update_%20Thu%2C%202022-03-31.pdf. Accessed on: April 25, 2022
  • Gujarati, D. N., & Dawn, C. (2009). Basic econometrics (0071276254).
  • Haji, J., & Gelaw, F. (2012). Determinants of the recent soaring food inflation in Ethiopia. Universal Journal of Education and General Studies, 1(8), 225-233.
  • Hill, R. C., Griffiths, W. E., & Lim, G. C. (2018). Principles of econometrics: John Wiley & Sons.
  • Keho, Y. (2021). Effects of Real Exchange Rate on Trade Balance in Cote d’Ivoire: Evidence from Threshold Nonlinear ARDL Model. Theoretical Economics Letters, 11(3), 507-521. doi:https://doi.org/10.4236/tel.2021.113034
  • Matovu, J. M., & Twimukye, E. P. (2009). Increasing world food prices: blessing or curse? Research Series No. 61, Economic Policy Research Centre (EPRC).
  • Mawejje, J. (2016). Food prices, energy and climate shocks in Uganda. Agricultural and Food Economics, 4(1), 1-18. DOI:10.1186/s40100-016-0049-6
  • Mbowa, S., Mawejje, J., & Kasirye, I. (2012). Understanding the Recent Food Price Trends in Uganda. EPRC Fact Sheet No. 4, November 2012.
  • Norazman, U. Z., Khalid, H., & Ghani, G. M. (2018). Food Inflation: A Study on Key Determinants and Price Transmission Processes for Malaysia. International Journal of Business and Society, 19(1), 117-138.
  • Phillips, P. C., & Perron, P. (1988). Testing for a unit root in time series regression. Biometrika, 75(2), 335-346. doi:https://doi.org/10.1093/biomet/75.2.335
  • Qayyum, A., & Sultana, B. (2018). Factors of food inflation: Evidence from time series of Pakistan. Journal of Banking and Finance Management, 1(2), 23-30.
  • Rangasamy, L. (2011). Food inflation in South Africa: Some implications for economic policy. South African Journal of Economics, 79(2), 184-201.
  • Rehman, F. U., & Khan, D. (2015). The determinants of food price inflation in Pakistan: An econometric analysis. Advances in Economics and Business, 3(12), 571-576. DOI:10.13189/aeb.2015.031205
  • Shao, Q., Chen, L., Zhong, R., & Weng, H. (2021). Marine economic growth, technological innovation, and industrial upgrading: A vector error correction model for China. Ocean and Coastal Management, 200, 105481. doi:https://doi.org/10.1016/j.ocecoaman.2020.105481
  • Simler, K. R. (2010). The Short-Term Impact of Higher Food Prices on Poverty in Uganda. Policy Research Working Paper 5210, The World Bank, Poverty Reduction and Economic Management Network. Poverty Reduction and Equity Group. February 2010.
  • UBOS. (2022). Uganda Bureau of Statistics, Explore Statistics. Retrieved from: https://www.ubos.org/explore-statistics/30/. Accessed on: April 25, 2022
  • Wassell, C. S., & Saunders, P. J. (2000). Time series evidence on social security and private saving: the issue revisited. Unpublished Manuscript, Department of Economics, Central Washington University.
  • WFP. (2022). Implications of the Conflict in Ukraine on Food Access and Availability in the East Africa Region. Retrieved from: https://reliefweb.int/sites/reliefweb.int/files/resources/WFP-0000138223_0.pdf. Accessed on: April 25, 2022
  • Yavuz, F. (2021b). Türkiye'de Gıda Enflasyonu: Tarladan Çatala Sorunların Bir Göstergesi.
  • Yavuz, F. (2022). Rusya-Ukrayna Savaşının Gıda Güvenliğine Etkileri Üzerine. Retrieved from: https://kriterdergi.com/yazar/fahri-yavuz/rusya-ukrayna-savasinin-gida-guvenligine-etkileri-uzerine. Accessed on: May 20, 2022
Ekinoks Ekonomi İşletme ve Siyasal Çalışmalar Dergisi-Cover
  • Yayın Aralığı: Yılda 2 Sayı
  • Başlangıç: 2019
  • Yayıncı: Siirt Üniversitesi
Arşiv
Sayıdaki Diğer Makaleler

Role of macroeconomic indicators in Uganda’s food price inflation: a VECM approach

Denis WAİSWA