In this study, we examine the location tax/subsidy competition between two countries when governments set tax or subsidy policies after firms have decided their location using a third-market model. The previous literature on tax competition with the choice of production location of firms has relied on a model in which governments set tax/subsidy policies before firms choose their production location between countries. However, if governments cannot commit to their policies in advance, the timing of decision-making changes so that governments determine their tax/subsidy rates after firms choose their location. Considering the different timings of the game, we show the following results. First, firms choose to stay in the countries in which they were originally established and governments subsidize the firms located in their countries. As a result, exporting countries fall into excessive subsidization competition, whereas firms can obtain higher profits than in the no-subsidization case. Second, when tax/subsidy authorities are tax-revenue maximizers, there are two different equilibria in tax competition in which each firm chooses to locate in different countries. Social welfare is larger when governments are tax-revenue maximizers than when they are social-welfare maximizers, whereas firms' profits are smaller when governments are tax-revenue maximizers.
{"title":"Location Tax/Subsidy Competition: When Governments Set Their Policies After Firms Choose Their Locations","authors":"Kojun Hamada, Yoshitomo Ogawa, Mitsuyoshi Yanagihara","doi":"10.1080/10168737.2021.1928265","DOIUrl":"https://doi.org/10.1080/10168737.2021.1928265","url":null,"abstract":"In this study, we examine the location tax/subsidy competition between two countries when governments set tax or subsidy policies after firms have decided their location using a third-market model. The previous literature on tax competition with the choice of production location of firms has relied on a model in which governments set tax/subsidy policies before firms choose their production location between countries. However, if governments cannot commit to their policies in advance, the timing of decision-making changes so that governments determine their tax/subsidy rates after firms choose their location. Considering the different timings of the game, we show the following results. First, firms choose to stay in the countries in which they were originally established and governments subsidize the firms located in their countries. As a result, exporting countries fall into excessive subsidization competition, whereas firms can obtain higher profits than in the no-subsidization case. Second, when tax/subsidy authorities are tax-revenue maximizers, there are two different equilibria in tax competition in which each firm chooses to locate in different countries. Social welfare is larger when governments are tax-revenue maximizers than when they are social-welfare maximizers, whereas firms' profits are smaller when governments are tax-revenue maximizers.","PeriodicalId":35933,"journal":{"name":"INTERNATIONAL ECONOMIC JOURNAL","volume":null,"pages":null},"PeriodicalIF":1.1,"publicationDate":"2021-05-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1080/10168737.2021.1928265","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43594259","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-04-03DOI: 10.1080/10168737.2021.1916774
C. Nguena, Fulbert Tchana Tchana, Albert G. Zeufack
Using a panel database of 48 Sub-Saharan African countries from 2000 to 2012 that we partially constructed, this paper analyses the structure of housing finance in Africa, its determinants, and its impact on inclusive growth. We find that market capitalization and urbanization are key positive determinants of housing finance, while a post-conflict environment is conducive to greater housing finance development. This result suggests that housing finance is driven by standard market forces of demand and supply. Besides, we find that housing finance development in Africa is not yet an effective tool for reducing economic inequality, at its current, very earlier stage. However, we show that above a given threshold, housing finance could be efficient at reducing inequality. Finally, there is a slightly positive relationship between housing finance and greater economic development in Africa. All these findings suggest that policies to boost housing finance development in Africa would be fruitful in the medium to long terms.
{"title":"Housing Finance and Inclusive Growth in Africa: Benchmarking, Determinants and Effects","authors":"C. Nguena, Fulbert Tchana Tchana, Albert G. Zeufack","doi":"10.1080/10168737.2021.1916774","DOIUrl":"https://doi.org/10.1080/10168737.2021.1916774","url":null,"abstract":"Using a panel database of 48 Sub-Saharan African countries from 2000 to 2012 that we partially constructed, this paper analyses the structure of housing finance in Africa, its determinants, and its impact on inclusive growth. We find that market capitalization and urbanization are key positive determinants of housing finance, while a post-conflict environment is conducive to greater housing finance development. This result suggests that housing finance is driven by standard market forces of demand and supply. Besides, we find that housing finance development in Africa is not yet an effective tool for reducing economic inequality, at its current, very earlier stage. However, we show that above a given threshold, housing finance could be efficient at reducing inequality. Finally, there is a slightly positive relationship between housing finance and greater economic development in Africa. All these findings suggest that policies to boost housing finance development in Africa would be fruitful in the medium to long terms.","PeriodicalId":35933,"journal":{"name":"INTERNATIONAL ECONOMIC JOURNAL","volume":null,"pages":null},"PeriodicalIF":1.1,"publicationDate":"2021-04-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1080/10168737.2021.1916774","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48434630","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-04-03DOI: 10.1080/10168737.2021.1913622
Mohsen Bahmani‐Oskooee, A. Mohammadian
Previous studies have assessed the impact of policy uncertainty on consumption and investment in G7 countries. In this study, we assess its impact on domestic output in the same countries. Furthermore, we argue that its impact could be asymmetric, implying that increased uncertainty affects domestic output at a different rate than decreased uncertainty. Unlike consumption and investment, we find the unanimous outcome in all G7 countries that increased uncertainty hurts domestic output and decreased uncertainty boosts it, though significant long-run asymmetric evidence was found only in the cases of Canada, Japan, and the U.S. Thus, any policy aimed at reducing uncertainty will be growth-enhancing.
{"title":"On the Link Between Policy Uncertainty and Domestic Production in G7 Countries: An Asymmetry Analysis","authors":"Mohsen Bahmani‐Oskooee, A. Mohammadian","doi":"10.1080/10168737.2021.1913622","DOIUrl":"https://doi.org/10.1080/10168737.2021.1913622","url":null,"abstract":"Previous studies have assessed the impact of policy uncertainty on consumption and investment in G7 countries. In this study, we assess its impact on domestic output in the same countries. Furthermore, we argue that its impact could be asymmetric, implying that increased uncertainty affects domestic output at a different rate than decreased uncertainty. Unlike consumption and investment, we find the unanimous outcome in all G7 countries that increased uncertainty hurts domestic output and decreased uncertainty boosts it, though significant long-run asymmetric evidence was found only in the cases of Canada, Japan, and the U.S. Thus, any policy aimed at reducing uncertainty will be growth-enhancing.","PeriodicalId":35933,"journal":{"name":"INTERNATIONAL ECONOMIC JOURNAL","volume":null,"pages":null},"PeriodicalIF":1.1,"publicationDate":"2021-04-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1080/10168737.2021.1913622","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48809301","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-04-03DOI: 10.1080/10168737.2021.1916773
David Silei
I consider a two-country model, in which two asymmetric firms invest in R&D to increase their competitiveness and compete over the supply of a homogeneous product, and the government grants R&D subsidies to increase welfare. In this setting I show that optimal R&D policy is affected by industrywide international competitive advantages. Similar to conventional wisdom on strategic trade policy, competitive advantages have a positive impact on the optimal amount of R&D subsidy in the case of R&D competition. With international R&D cooperation, this conclusion is reversed: subsidising the more competitive firm may have, if any, very little impact on domestic welfare.
{"title":"Allocation of the Public R&D Budget: The Impact of International Competitive Advantages and R&D Alliances","authors":"David Silei","doi":"10.1080/10168737.2021.1916773","DOIUrl":"https://doi.org/10.1080/10168737.2021.1916773","url":null,"abstract":"I consider a two-country model, in which two asymmetric firms invest in R&D to increase their competitiveness and compete over the supply of a homogeneous product, and the government grants R&D subsidies to increase welfare. In this setting I show that optimal R&D policy is affected by industrywide international competitive advantages. Similar to conventional wisdom on strategic trade policy, competitive advantages have a positive impact on the optimal amount of R&D subsidy in the case of R&D competition. With international R&D cooperation, this conclusion is reversed: subsidising the more competitive firm may have, if any, very little impact on domestic welfare.","PeriodicalId":35933,"journal":{"name":"INTERNATIONAL ECONOMIC JOURNAL","volume":null,"pages":null},"PeriodicalIF":1.1,"publicationDate":"2021-04-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1080/10168737.2021.1916773","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44375256","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-04-03DOI: 10.1080/10168737.2021.1910722
Chul‐Woo Kwon, Uk Hwang
This paper aims to analyze how the threat of offshoring can lead policymakers to adopt more lenient emissions tax policies. This study focuses on analyzing the relationship between the stringency of environmental policies and firms’ strategic offshoring decisions when a government is concerned about the negative effects of increased offshoring such as domestic job losses. The analysis is based on an archetypal proximity concentration framework that has been enhanced by considering environmental regulations and abatement technology. The results imply that the threat of offshoring is more likely to impact emissions tax rates when firms experience higher productivity, or when offshoring leads to a significant level of domestic unemployment. That is, in these cases, the threat of offshoring is more likely to make the government lower emissions tax rates more than the optimal tax rate. Although the direct impact of offshoring on environmental policies is studied in many related works, the indirect impact of offshoring-that is, the threat of offshoring- on environmental policies has been seldom studied.
{"title":"The Threat of Offshoring on the Environmental Regulation","authors":"Chul‐Woo Kwon, Uk Hwang","doi":"10.1080/10168737.2021.1910722","DOIUrl":"https://doi.org/10.1080/10168737.2021.1910722","url":null,"abstract":"This paper aims to analyze how the threat of offshoring can lead policymakers to adopt more lenient emissions tax policies. This study focuses on analyzing the relationship between the stringency of environmental policies and firms’ strategic offshoring decisions when a government is concerned about the negative effects of increased offshoring such as domestic job losses. The analysis is based on an archetypal proximity concentration framework that has been enhanced by considering environmental regulations and abatement technology. The results imply that the threat of offshoring is more likely to impact emissions tax rates when firms experience higher productivity, or when offshoring leads to a significant level of domestic unemployment. That is, in these cases, the threat of offshoring is more likely to make the government lower emissions tax rates more than the optimal tax rate. Although the direct impact of offshoring on environmental policies is studied in many related works, the indirect impact of offshoring-that is, the threat of offshoring- on environmental policies has been seldom studied.","PeriodicalId":35933,"journal":{"name":"INTERNATIONAL ECONOMIC JOURNAL","volume":null,"pages":null},"PeriodicalIF":1.1,"publicationDate":"2021-04-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1080/10168737.2021.1910722","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44223561","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-03-26DOI: 10.1080/10168737.2021.1907606
Minjung Park
This paper studies identification and estimation of installed-base effects for product adoption using group-level panel data in the presence of endogenous sample attrition and homophily. After exploring conditions under which installed-base effects are identified using group-level panel data in the considered setting, I propose a modified BLP approach for estimation. The proposed approach accounts for endogenously changing composition of remaining group members in the simulation of predicted adoption rates, thereby addressing sample attrition. To address homophily, the proposed method performs first-differencing within a given group and uses lags and lagged differences of the installed base as instruments. I present Monte Carlo results to numerically demonstrate the identification issues as well as the performance of the proposed estimation method.
{"title":"Identification and Estimation of Installed-Base Effects for Product Adoption Under Sample Attrition and Homophily","authors":"Minjung Park","doi":"10.1080/10168737.2021.1907606","DOIUrl":"https://doi.org/10.1080/10168737.2021.1907606","url":null,"abstract":"This paper studies identification and estimation of installed-base effects for product adoption using group-level panel data in the presence of endogenous sample attrition and homophily. After exploring conditions under which installed-base effects are identified using group-level panel data in the considered setting, I propose a modified BLP approach for estimation. The proposed approach accounts for endogenously changing composition of remaining group members in the simulation of predicted adoption rates, thereby addressing sample attrition. To address homophily, the proposed method performs first-differencing within a given group and uses lags and lagged differences of the installed base as instruments. I present Monte Carlo results to numerically demonstrate the identification issues as well as the performance of the proposed estimation method.","PeriodicalId":35933,"journal":{"name":"INTERNATIONAL ECONOMIC JOURNAL","volume":null,"pages":null},"PeriodicalIF":1.1,"publicationDate":"2021-03-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1080/10168737.2021.1907606","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48517379","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-03-16DOI: 10.1080/10168737.2021.1901762
H. Pham, Thanh Le, L. Nguyen
This paper investigates the effect of monetary policy on liquidity creation of commercial banks and if the effect is conditional on bank size. The paper uses a dataset covering 23 Vietnamese commercial banks during the period 2007–2017 collected from various sources including State Bank of Vietnam, International Monetary Fund, SNL Financial database (provided by SNL Company), Vietnam General Statistic Office and banks’ annual reports. Different econometric techniques are employed to analyse the data. Obtained results indicate that a contractionary monetary policy could lead to a decrease in bank liquidity creation. This result is less pronounced with larger banks. In particular, among three monetary policy instruments employed in Vietnam, an increase in the base rate is significantly associated with a contraction in bank liquidity creation; open market operations may have a marginal impact while required reserve ratio is ineffective because of its unchanged value throughout the period of the study. This paper is among the first, providing an insight into each monetary policy instrument's role in influencing bank liquidity creation in the context of an emerging economy.
{"title":"Monetary Policy and Bank Liquidity Creation: Does Bank Size Matter?","authors":"H. Pham, Thanh Le, L. Nguyen","doi":"10.1080/10168737.2021.1901762","DOIUrl":"https://doi.org/10.1080/10168737.2021.1901762","url":null,"abstract":"This paper investigates the effect of monetary policy on liquidity creation of commercial banks and if the effect is conditional on bank size. The paper uses a dataset covering 23 Vietnamese commercial banks during the period 2007–2017 collected from various sources including State Bank of Vietnam, International Monetary Fund, SNL Financial database (provided by SNL Company), Vietnam General Statistic Office and banks’ annual reports. Different econometric techniques are employed to analyse the data. Obtained results indicate that a contractionary monetary policy could lead to a decrease in bank liquidity creation. This result is less pronounced with larger banks. In particular, among three monetary policy instruments employed in Vietnam, an increase in the base rate is significantly associated with a contraction in bank liquidity creation; open market operations may have a marginal impact while required reserve ratio is ineffective because of its unchanged value throughout the period of the study. This paper is among the first, providing an insight into each monetary policy instrument's role in influencing bank liquidity creation in the context of an emerging economy.","PeriodicalId":35933,"journal":{"name":"INTERNATIONAL ECONOMIC JOURNAL","volume":null,"pages":null},"PeriodicalIF":1.1,"publicationDate":"2021-03-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1080/10168737.2021.1901762","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47113041","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-03-16DOI: 10.1080/10168737.2021.1901763
Sanjeev Vasudevan, Suresh Babu Manalaya
This study examines the effects of the Eurasian Economic Union (EAEU) on global production sharing and trade in parts and components. With a panel dataset of disaggregated bilateral exports of EAEU members and 28 partners, we estimate an augmented gravity model for 2010–2017. To mitigate endogeneity issues, we employ the Hausman and Taylor Estimator. The study has two important findings. First, there are significant trade diversion effects on the exports of parts and components. Second, the formation of EAEU has resulted in a reduction in intra-bloc exports. In addition to these, we find that market size, inter-country differentials of income, business-friendly climate, and cultural similarities are the other significant determinants of bilateral trade. Based on the empirical analysis, we propose that the EAEU normalise the Common External Tariff below the current level to minimise trade diversion.
{"title":"Trade Effects of Eurasian Economic Union and Global Production Sharing: A Gravity Analysis","authors":"Sanjeev Vasudevan, Suresh Babu Manalaya","doi":"10.1080/10168737.2021.1901763","DOIUrl":"https://doi.org/10.1080/10168737.2021.1901763","url":null,"abstract":"This study examines the effects of the Eurasian Economic Union (EAEU) on global production sharing and trade in parts and components. With a panel dataset of disaggregated bilateral exports of EAEU members and 28 partners, we estimate an augmented gravity model for 2010–2017. To mitigate endogeneity issues, we employ the Hausman and Taylor Estimator. The study has two important findings. First, there are significant trade diversion effects on the exports of parts and components. Second, the formation of EAEU has resulted in a reduction in intra-bloc exports. In addition to these, we find that market size, inter-country differentials of income, business-friendly climate, and cultural similarities are the other significant determinants of bilateral trade. Based on the empirical analysis, we propose that the EAEU normalise the Common External Tariff below the current level to minimise trade diversion.","PeriodicalId":35933,"journal":{"name":"INTERNATIONAL ECONOMIC JOURNAL","volume":null,"pages":null},"PeriodicalIF":1.1,"publicationDate":"2021-03-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1080/10168737.2021.1901763","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"59859877","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-01-02DOI: 10.1080/10168737.2020.1858323
Ibrahim Ngouhouo, Tii N. Nchofoung, A. A. Njamen Kengdo
ABSTRACT This paper aims to analyse the determinants of trade openness in Sub-Saharan Africa (SSA) countries focusing on the role play by domestic institutions. To achieve this, the Generalized Methods of Moments (GMM) is carried out on 36 SSA countries over the period 1996-2017. The results of our estimation reveal that domestic institutions as a composite index determines trade openness as a composite share of Squalli and Wilson (2011). In addition, government effectiveness, Regulatory quality and rule of law were all enhancing on trade openness. Moreover, access to sea, foreign direct investment, and trade openness lagged by one period all significantly determine trade openness in our estimations, with all these effects positive. When trade share was considered as a robustness check, inflation and population growth were further found to be significantly determine trade openness, whereas GDP per capital was significantly trade enhancing. This result was robust to alternative institutional measures and sensitive to the choices of countries and sample periods considered. The policy implications of study engaged the different states of SSA to focus on improving the quality of their domestic institutions in elaborating their international trade policies.
{"title":"Determinants of Trade Openness in Sub-Saharan Africa: Do Institutions Matter?","authors":"Ibrahim Ngouhouo, Tii N. Nchofoung, A. A. Njamen Kengdo","doi":"10.1080/10168737.2020.1858323","DOIUrl":"https://doi.org/10.1080/10168737.2020.1858323","url":null,"abstract":"ABSTRACT This paper aims to analyse the determinants of trade openness in Sub-Saharan Africa (SSA) countries focusing on the role play by domestic institutions. To achieve this, the Generalized Methods of Moments (GMM) is carried out on 36 SSA countries over the period 1996-2017. The results of our estimation reveal that domestic institutions as a composite index determines trade openness as a composite share of Squalli and Wilson (2011). In addition, government effectiveness, Regulatory quality and rule of law were all enhancing on trade openness. Moreover, access to sea, foreign direct investment, and trade openness lagged by one period all significantly determine trade openness in our estimations, with all these effects positive. When trade share was considered as a robustness check, inflation and population growth were further found to be significantly determine trade openness, whereas GDP per capital was significantly trade enhancing. This result was robust to alternative institutional measures and sensitive to the choices of countries and sample periods considered. The policy implications of study engaged the different states of SSA to focus on improving the quality of their domestic institutions in elaborating their international trade policies.","PeriodicalId":35933,"journal":{"name":"INTERNATIONAL ECONOMIC JOURNAL","volume":null,"pages":null},"PeriodicalIF":1.1,"publicationDate":"2021-01-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1080/10168737.2020.1858323","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46779378","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-01-02DOI: 10.1080/10168737.2020.1870524
Manel Youssef, Khaled Mokni
This paper investigates the impact of oil price shocks on the world food prices. We use the structural VAR model to disentangle oil price shocks into supply, aggregate demand, and oil-specific demand-driven shocks. Moreover, we employ a new approach based on the Markov regime-switching quantile regression (MRS-QR) model to investigate the response of food prices to different oil price shocks. Based on monthly data from 1992 to 2018, results show that the reaction of food prices to different structural oil shocks depends on the oil price regimes and varies in significance, sign, and size throughout the food market conditions. Besides, the increases in regression coefficients and smoothed probability during food and oil crisis periods confirm the existence of contagion effects between oil and food markets. Moreover, we find that the supply and aggregate demand shocks do not show a strong contribution to the presence of this phenomenon. Conversely, oil-specific demand shocks represent the main factor that contributes to contagion between oil and food markets.
{"title":"On the Nonlinear Impact of Oil Price Shocks on the World Food Prices Under Different Markets Conditions","authors":"Manel Youssef, Khaled Mokni","doi":"10.1080/10168737.2020.1870524","DOIUrl":"https://doi.org/10.1080/10168737.2020.1870524","url":null,"abstract":"This paper investigates the impact of oil price shocks on the world food prices. We use the structural VAR model to disentangle oil price shocks into supply, aggregate demand, and oil-specific demand-driven shocks. Moreover, we employ a new approach based on the Markov regime-switching quantile regression (MRS-QR) model to investigate the response of food prices to different oil price shocks. Based on monthly data from 1992 to 2018, results show that the reaction of food prices to different structural oil shocks depends on the oil price regimes and varies in significance, sign, and size throughout the food market conditions. Besides, the increases in regression coefficients and smoothed probability during food and oil crisis periods confirm the existence of contagion effects between oil and food markets. Moreover, we find that the supply and aggregate demand shocks do not show a strong contribution to the presence of this phenomenon. Conversely, oil-specific demand shocks represent the main factor that contributes to contagion between oil and food markets.","PeriodicalId":35933,"journal":{"name":"INTERNATIONAL ECONOMIC JOURNAL","volume":null,"pages":null},"PeriodicalIF":1.1,"publicationDate":"2021-01-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1080/10168737.2020.1870524","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44363372","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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