Effects of oil price on food prices in developing oil exporting countries: a panel autoregressive distributed lag analysis

This study focused on the relationship between oil and food prices in developing oil-exporting countries. Annual data sets of 31 developing oil-exporting countries were employed. The study covered a period of 13years, spanning 2001-2013. Given the mixed stationarity processes of the variables of interest, we adopted a panel autoregressive distributed lag (ARDL) approach, proposed by Pesaran etal. (2001, Journal of Applied Econometrics, 16, 289). The bound test cointegration showed a long-run cointegration to exist between food prices and oil price in the sample countries. The long-run result showed positive and significant effects of oil price on food prices while the short-run effect was also positive but insignificant. We therefore conclude that oil price has a long-run positive effect on food price and recommend that developing oil-exporting countries should formulate long-term agricultural policies to insulate their economies from any global food crisis that may result from oil price changes.