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Food inflation: A study on key determinants and price transmission processes for Malaysia

In Malaysia, food price inflation reached its highest level at 8.8% in mid-2008 compared to overall inflation of 5.5% for the same period, mainly blamed on the spike in world commodity prices. However, recent moves by the government to rationalize food and energy subsidies have also led to higher...

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Main Authors: Norazman, Umi Zakiah, Khalid, Haniza, Mat Ghani, Gairuzazmi
Format: Article
Language:English
English
English
Published: Universiti Malaysia Sarawak 2018
Subjects:
HB Economic Theory
HB221 Price
HB522 Income. Factor shares.Interest.Profit.Entrepreneurship
Online Access:http://irep.iium.edu.my/63001/1/IJBSVol19-no1-paper9.pdf
http://irep.iium.edu.my/63001/7/63001_Food%20inflation%20A%20study%20on%20key%20determinants%20and%20price%20transmission%20processes%20for%20Malaysia_scopus.pdf
http://irep.iium.edu.my/63001/13/63001_Food%20inflation_WoS.pdf
http://irep.iium.edu.my/63001/
http://www.ijbs.unimas.my/images/repository/pdf/Vol19-no1-paper9.pdf
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spelling my.iium.irep.630012018-10-18T02:16:22Z http://irep.iium.edu.my/63001/ Food inflation: A study on key determinants and price transmission processes for Malaysia Norazman, Umi Zakiah Khalid, Haniza Mat Ghani, Gairuzazmi HB Economic Theory HB221 Price HB522 Income. Factor shares.Interest.Profit.Entrepreneurship In Malaysia, food price inflation reached its highest level at 8.8% in mid-2008 compared to overall inflation of 5.5% for the same period, mainly blamed on the spike in world commodity prices. However, recent moves by the government to rationalize food and energy subsidies have also led to higher than normal headline inflation figures and cause public concern. This study investigates the supply-side determinants of food price through a price transmission perspective. Horizontal price transmission channel relates to how trade, transportation cost, exchange rates and distances between geographical areas affect producer prices. On the other hand, vertical price transmission relates to how price changes throughout the domestic supply chain to reflect food processing and distribution costs. A vector error correction model (VECM) using monthly data from 1991 to 2013 confirms that world food commodity prices and real effective exchange rate are the primary determinants of food prices in Malaysia; whereas changes in the vertical transmission channel may have been muted by government price controls and subsidy programs or the industry’s organization. Given that world commodity price is likely to be more uncertain in the near future, understanding the dynamics of these shocks and price transmission processes will be important for future policy enhancements. Universiti Malaysia Sarawak 2018-01 Article PeerReviewed application/pdf en http://irep.iium.edu.my/63001/1/IJBSVol19-no1-paper9.pdf application/pdf en http://irep.iium.edu.my/63001/7/63001_Food%20inflation%20A%20study%20on%20key%20determinants%20and%20price%20transmission%20processes%20for%20Malaysia_scopus.pdf application/pdf en http://irep.iium.edu.my/63001/13/63001_Food%20inflation_WoS.pdf Norazman, Umi Zakiah and Khalid, Haniza and Mat Ghani, Gairuzazmi (2018) Food inflation: A study on key determinants and price transmission processes for Malaysia. International Journal of Business and Society, 19 (1). pp. 117-138. ISSN 1511-6670 http://www.ijbs.unimas.my/images/repository/pdf/Vol19-no1-paper9.pdf
institution Universiti Islam Antarabangsa Malaysia
building IIUM Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider International Islamic University Malaysia
content_source IIUM Repository (IREP)
url_provider http://irep.iium.edu.my/
language English
English
English
topic HB Economic Theory
HB221 Price
HB522 Income. Factor shares.Interest.Profit.Entrepreneurship
spellingShingle HB Economic Theory
HB221 Price
HB522 Income. Factor shares.Interest.Profit.Entrepreneurship
Norazman, Umi Zakiah
Khalid, Haniza
Mat Ghani, Gairuzazmi
Food inflation: A study on key determinants and price transmission processes for Malaysia
description In Malaysia, food price inflation reached its highest level at 8.8% in mid-2008 compared to overall inflation of 5.5% for the same period, mainly blamed on the spike in world commodity prices. However, recent moves by the government to rationalize food and energy subsidies have also led to higher than normal headline inflation figures and cause public concern. This study investigates the supply-side determinants of food price through a price transmission perspective. Horizontal price transmission channel relates to how trade, transportation cost, exchange rates and distances between geographical areas affect producer prices. On the other hand, vertical price transmission relates to how price changes throughout the domestic supply chain to reflect food processing and distribution costs. A vector error correction model (VECM) using monthly data from 1991 to 2013 confirms that world food commodity prices and real effective exchange rate are the primary determinants of food prices in Malaysia; whereas changes in the vertical transmission channel may have been muted by government price controls and subsidy programs or the industry’s organization. Given that world commodity price is likely to be more uncertain in the near future, understanding the dynamics of these shocks and price transmission processes will be important for future policy enhancements.
format Article
author Norazman, Umi Zakiah
Khalid, Haniza
Mat Ghani, Gairuzazmi
author_facet Norazman, Umi Zakiah
Khalid, Haniza
Mat Ghani, Gairuzazmi
author_sort Norazman, Umi Zakiah
title Food inflation: A study on key determinants and price transmission processes for Malaysia
title_short Food inflation: A study on key determinants and price transmission processes for Malaysia
title_full Food inflation: A study on key determinants and price transmission processes for Malaysia
title_fullStr Food inflation: A study on key determinants and price transmission processes for Malaysia
title_full_unstemmed Food inflation: A study on key determinants and price transmission processes for Malaysia
title_sort food inflation: a study on key determinants and price transmission processes for malaysia
publisher Universiti Malaysia Sarawak
publishDate 2018
url http://irep.iium.edu.my/63001/1/IJBSVol19-no1-paper9.pdf
http://irep.iium.edu.my/63001/7/63001_Food%20inflation%20A%20study%20on%20key%20determinants%20and%20price%20transmission%20processes%20for%20Malaysia_scopus.pdf
http://irep.iium.edu.my/63001/13/63001_Food%20inflation_WoS.pdf
http://irep.iium.edu.my/63001/
http://www.ijbs.unimas.my/images/repository/pdf/Vol19-no1-paper9.pdf
_version_ 1643617824600489984
score 13.211869

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