Relationship between Food Prices and Non-Raw Materials Input: VAR Analysis
Keywords:
Brent oil, Dollar exchange rate, Electricity-natural gas, Food prices, Minimum wageAbstract
Inflation is defined as the general increase in prices in the most general sense and is an important macroeconomic indicator. The increase in food prices is affected by the general inflation rate and it is an important indicator in determining the monetary policies implemented. In recent years, factors such as global crises, climate changes, foreign dependency in energy have sharpened the rises in national indicators. In this study, in Turkey, the effects of electricity-natural gas, Brent oil, dollar exchange rate and labor cost (minimum wage), which are the most important cost items in forming food prices, in the quarterly periods between 2003Q1-2022Q4 were analyzed. Vector Autoregression (VAR) model was used as the analysis method, the cointegration relationship between the variables can be accepted with a lagged value in the model and the error correction model is assumed to consist of an autoregressive distributed lag model. Literature review showed that external factors will affect food prices more as a hypothesis. According to the variance decomposition analysis results in the VAR model, the most important factors affecting food prices are exchange rate in the short run and Brent oil price in the long run. It has been observed that the minimum wage has the lowest effect. In the research, one limitation is that only factors such as electricity-natural gas, Brent oil, dollar exchange rate and labor cost were taken into account in evaluating impact on food prices, and other economic, social and climatic factors affecting agricultural production were not taken into account. In previous studies, the effects of factors such as electricity-natural gas, Brent oil price, dollar rate and labor cost on food prices were examined separately; this study contributes to determining which factor is more effective over the long and short term.
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