Volatile Volatility: Conceptual and Measurement Issues Related to Price Trends and Volatility

Díaz-Bonilla, Eugenio

doi:10.1007/978-3-319-28201-5_2

Cited by 9 publications

(2 citation statements)

References 12 publications

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“…Thus, a better understanding of food markets, especially in an era of globalisation (Duarte et al, 2014, Biewald et al, 2014, Suweis et al, 2015), is crucial to provide solid bases for food policies and resource management (Wang et al, 2016). This interest has been reinforced recently – after the two waves of world food price crises (2008 and 2011) – where economists analysed the aftermaths of price ‘spikes' to assess the short-run effects (Piesse and Thirtle, 2009, Bellemare, 2015) and the main causes of temporal food price volatility (see Díaz-Bonilla, 2016, for a discussion). A common assumption behind these studies, and usual among agricultural economists, is the so-called Law of One Price (henceforth LOP ): once prices are converted to a common currency (including transaction and transport costs), homogeneous goods should be sold for the same price in different countries (Miljkovic, 1999).…”

Section: Introductionmentioning

confidence: 99%

Spatial Distribution of the International Food Prices: Unexpected Heterogeneity and Randomness

Distefano

Chiarotti

Laio

et al. 2019

Ecological Economics

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Global food prices are typically analysed in a time-series framework. We complement this approach by focusing on the spatial price dispersion of the country-pair bilateral trade in the international food trade network ( IFTN ), for ten relevant commodities. The main purposes are to verify if the Law of One Price ( LOP ) holds and to investigate the emergence of randomness in the price-formation mechanism. We distinguish between the “internal” variance, which indicates the magnitude of price discrimination, and the “external” variance, that is a measure of price dispersion. We find that, for some commodities, spatial price dispersion is remarkable and persistent over time (i.e., failure of the LOP ) and that there exists a strict correlation between price spikes and peaks in spatial price variability. We test whether the price distribution can be replicated through a stochastic process of extraction. Surprisingly, the actual distribution of prices, for several commodities, is well described by a random distribution. Then, the process of data aggregation is not neutral because the information at the micro-level scale might be lost at the macro-scale, due to the complexity of the IFTN . Finally, we discuss some possible economic explanations of these outcomes and the main methodological, environmental, and policy consequences.

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Section: Introductionmentioning

confidence: 99%

Spatial Distribution of the International Food Prices: Unexpected Heterogeneity and Randomness

Distefano

Chiarotti

Laio

et al. 2019

Ecological Economics

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“…In contrast, food price volatility induces price risk and uncertainty, which challenge both consumers' and producers' ability to make decisions that are optimal for their welfare [11][12][13][14] . For producers, it is more difficult to predict the potential returns of their investments, which can lead to reduced agricultural production 15 . Similarly, volatile food prices challenge consumers' ability to appropriately plan and budget for their food expenses.…”

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confidence: 99%

Trade policy announcements can increase price volatility in global food commodity markets

2023

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Many countries use trade policy to insulate their domestic markets from price volatility. However, there is a widespread concern that such policies—particularly export restrictions—may amplify global price volatility, adversely affecting other countries. Here, using an original dataset on trade policy announcements on wheat and maize encompassing the food price crises of 2007–2008 and 2010–2011, we show that the announcement of trade policy changes can increase global price volatility. This effect applies not only to export restrictions but also to import liberalization measures and is most pronounced when markets are tight (stocks are low). Policymakers should work towards increasing stock levels to mitigate price volatility effects of trade policy changes. When markets are tight, export restrictions and import liberalizations should be avoided.

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Markets

Hansen

2024

Palgrave Advances in Bioeconomy: Economics and Policies

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Markets are important for agriculture and for the supply and processing industries in the entire food sector. Efficient markets are necessary to reduce transaction costs, avoid bottlenecks, optimize specialization in value chains, ensure effective competition, etc. At the same time, markets develop and change continuously. The importance of international trade markets is increasing, but the trend is much stronger for industrial goods than it is for agricultural products. The agricultural and food markets are characterized by some specific conditions compared to other markets. One characteristic is that prices generally and in the slightly longer term rise at a slower rate than inflation, i.e., there is a real price fall. Studies also find an increasing price spread (from farm-to-fork) and a decline in farmers’ terms of trade and in real food retail prices.

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Volatile Volatility: Conceptual and Measurement Issues Related to Price Trends and Volatility

Cited by 9 publications

References 12 publications

Spatial Distribution of the International Food Prices: Unexpected Heterogeneity and Randomness

Spatial Distribution of the International Food Prices: Unexpected Heterogeneity and Randomness

Trade policy announcements can increase price volatility in global food commodity markets

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