Assessing the Asymmetric Effect of Global Climate Anomalies on Food Prices: Evidence from Local Prices

Abstract

This paper uses time-varying smooth transition autoregressive model to investigate the asymmetric nature of El Niño Southern Oscillation (ENSO) —an exogenous climatic factor—with respect to the nonlinear dynamics of food prices in sub-Saharan Africa. Curating food price series from more than 1100 markets from 36 SSA countries, the study finds that ENSO (linearly or nonlinearly) affects roughly half of food prices considered, with most nonlinear models exhibiting strong asymmetric properties with shock-inflicted persistence. Moreover, in terms of the location of the burden of ENSO impact, I find a geographical and food product divide. Specifically, ENSO appears to be more efficacious on maize prices in Southern, Eastern, and some parts of Central Africa. Conversely, local rice, cassava, millet, and animal products are least affected. The policy implication of this dichotomy is that response to ENSO news should be subregion-specific rather than region-specific, depending on how the subregions absorb the shock.