Do the World Energy Price Shocks Explain Thailand's Rice Turmoil?: A Co-Integration Analysis
13 Pages Posted: 3 Nov 2008
Date Written: November 2, 2008
A number of production and non-production factors explain the rapidly soaring commodity prices which have undermined national and international food security around the world. Among these factors, the recent world energy price shocks get the most consistent credit for the commodity price turmoil. This paper attempts to empirically investigate such linkages in the context of Thailand's rice markets by employing the cointegration analysis. I show that there exists a long-run relationship between the world energy price shocks and the hikes in Thailand's rice prices. The Error Correction Mechanism (ECM) further reveals that in short run the market is irresponsive to the energy price shocks, other temporary shocks leave merely temporary effects on the market - the rice prices will converge to their long-run trends over time.
Keywords: Co-integration Analysis, Error Correction Mechanism (ECM), Thailand's Rice Markets, The World Energy Prices
JEL Classification: C22, Q11, Q18
Suggested Citation: Suggested Citation