Oil-food price dynamics in an oil-dependent emerging economy
International Journal of Energy Sector Management
ISSN: 1750-6220
Article publication date: 31 July 2020
Issue publication date: 22 January 2021
Abstract
Purpose
This paper aims to examine the transmission from oil price to local food price returns in Nigeria from January 1995 to May 2019.
Design/methodology/approach
To circumvent erratic behaviours and account for possibilities of noises at the edge of the wavelet signals, the paper combines wavelet and Markov-switching techniques to determine the significance and magnitude of oil–food price dynamics across different time scales.
Findings
It is shown that oil to food price pass-through changed across frequencies. Notably, results reveal a swift pass-through which signals the dominance of the direct effect of oil price shocks on food prices with evidence of weak spillover in the short term. The medium- and long-term horizons witness the dominance of the indirect effect of oil price shocks with much sluggish transmission to food prices; the highest significant pass-through of about 4% are also observed when the oil price is denominated in the naira–USD exchange rate.
Originality/value
The study improves understanding of the relationship between oil price shocks and domestic food price returns. It shapes policy prescription on appropriate inflation targeting strategies of monetary authorities.
Keywords
Acknowledgements
The valuable suggestions of the editors and anonymous referees are commendable.
Citation
Adeosun, O.A., Olayeni, O.R. and Ayodele, O.S. (2021), "Oil-food price dynamics in an oil-dependent emerging economy", International Journal of Energy Sector Management, Vol. 15 No. 1, pp. 36-57. https://doi.org/10.1108/IJESM-03-2020-0015
Publisher
:Emerald Publishing Limited
Copyright © 2020, Emerald Publishing Limited