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Policy briefPrice transmission in food markets 2023This policy brief assesses whether domestic food markets in developing countries respond to changes in international prices and how fast. Price transmission – namely the extent to which changes in international food prices lead to changes in local food prices – is central to assessing the functioning of markets. The Law of One Price suggests that price transmission is complete, with the prices of a food product sold on competitive foreign and domestic markets differing only by transportation costs. Such a complete price pass-through is attained by trade. Changes in supply and demand in one country affect prices, which will in turn instigate trade with other countries. As trade restores the market equilibrium, prices in the domestic market tend to equalize with those in foreign markets except for transport costs - hence the term “Law of One Price”. Markets are important channels for economic integration, but they can also transmit shocks. In this respect, the policy brief shows that high import dependence and a liberalized trade regime are associated with faster price transmission. By contrast, countries experience a more incomplete pass-through of changes in international prices when trade costs are comparatively higher and trade policies are more restrictive. Finally, the analysis in this policy brief also suggest that when countries are import dependent and domestic markets are less integrated with international markets, consumers prices are generally much higher than world prices.
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DocumentPrice Volatility in Agricultural Markets
Evidence, impact on food security and policy responses
2011Recent bouts of extreme price volatility in global agricultural markets portend rising and more frequent threats to world food security. To reduce countries’ vulnerability, policies should improve market functioning and equip countries to better cope with the adverse effects of extreme volatility. -
Journal, magazine, bulletinFood Price Monitoring and Analysis (FPMA) Bulletin #6, 13 July 2021
Monthly Report on Food Price Trends
2021Also available in:
No results found.Export prices of grains declined in June, influenced by generally good supply prospects, while international rice prices also fell as high freight costs and container shortages limited sales. In East Africa, prices of coarse grains continue at exceptionally high levels in the Sudan and South Sudan, underpinned by insufficient supplies and severe macro-economic difficulties. Prices reached new record highs in the Sudan following a further depreciation of the national currency on the parallel market and the lifting of fuel subsidies, which inflated transport costs. In West Africa, seasonal upward trends in prices of domestically produced coarse grains continued in June in most countries, exacerbated by supply chain bottlenecks stemming from measures still in place to contain the COVID-19 pandemic, as well as compromised security conditions in some parts, amidst solid domestic demand. As in previous months, in several markets, prices were significantly higher than a year earlier.
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