Asymmetric relationship between global and national factors and domestic food prices: evidence from Turkey with novel nonlinear approaches

Abstract

This study investigates the asymmetric relationship between global and national factors and domestic food prices in Turkey, considering the recent rapid and continuous increase in domestic food prices. In this context, six global and three national explanatory variables were included, and monthly data for the period from January 2004 to June 2021 were used. In addition, novel nonlinear time-series econometric approaches, such as wavelet coherence, Granger causality in quantiles, and quantile-on-quantile regression, were applied for examination at different times, frequencies, and quantiles. Moreover, the Toda-Yamamoto (TY) causality test and quantile regression (QR) approach were used for robustness checks. The empirical results revealed that (i) there is a significant relationship between domestic food prices and explanatory variables at different times and frequencies; (ii) a causal relationship exists in most quantiles, excluding the lowest quantile, some middle quantiles, and the highest quantile for some variables; (iii) the power of the effect of the explanatory variables on domestic food prices varies according to the quantiles; and (iv) the results were validated by the TY causality test and QR, which show that the results were robust. Overall, the empirical results reveal that global and national factors have an asymmetric relationship with domestic food prices, highlighting the effects of fluctuations in global and national variables on domestic food prices. Thus, the results imply that Turkish policymakers should consider the asymmetric effects of global and national factors on domestic food prices at different times, frequencies, and quantiles.

Food Price Bubbles: Food Price Indices of Turkey, the FAO, the OECD, and the IMF

“…The literature provides some insights into the possible reasons for the periods with bubbles and their relation to Turkey. Food production, CDS spreads, interest rates, fertilizer prices, and raw-material prices, exchange rates, oil prices, fastest growth in exports, low productivity, rising input costs (Agriculture-PPI 2015 = 100 April 2013 index value is 804.64), inflation expectations, demand-side pressures of a growing population, changing consumer preferences, and supply-side elements such as low productivity, dominant players in the retail industry preventing price competitiveness, cost of capital, migration and aging rural populations, low productivity, agricultural education, and problems in the food supply chain are some of the reasons for the formation of food price bubbles [92][93][94][95][96][97][98]. Exchange rates have a strong impact on domestic food prices in countries that are highly dependent on imports of energy, fertilizers, and chemicals [99].…”

“…Preventing increases in agricultural input costs [95]; • By implementing necessary measures such as structural reform, Turkey can reduce the country risk that arises in economic, political, and financial areas, and thus, the adverse effects of country risk on domestic food prices can be eliminated [93]; It is recommended that Turkey considers the production of organic fertilizers and augments the domestic fertilizer supply in the context of food production [93].…”

Does Climate Change Cause an Upsurge in Food Prices?

“…Sixth, linear estimation methods (e.g., Granger causality, ARDL, VECM ordinary least squares) have generally been used to uncover the drivers of food prices. However, non-linearity and non-normality in economic data are common conditions that have been considered in only a few studies (see Kartal and Depren [ 41 ]), going largely ignored in the existing literature.…”

Dynamic link between central bank reserves, credit default swap spreads, and foreign exchange rates: Evidence from Turkey by time series econometrics

“…In economies, there are a variety of macroeconomic and financial indicators. Economic growth, inflation, interest rates, credit/deposit ratio, credit growth, non-performing loans, stock market indices, and unemployment are typical examples of these macroeconomic and financial indicators [ [5] , [6] , [7] , [8] , [9] ]. Although there are many indicators, CBR, CDS spreads, and FX rates are the ones, which are the most important indicators reflecting the soundness, riskiness, vulnerability, and predictability of countries [ [10] , [11] , [12] ].…”