Macroeconomic Drivers of Global Food Security; A Spatial Econometrics Analysis

Transcription

1 Macroeconomic Drivers of Global Food Security; A Spatial Econometrics Analysis Working Paper on Spatial effects on Global Food security. Presented by Philip Munyua

2 2008 commodity booms reignited the global food security debate

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4 and 2008 comparisons Similarities -general rise in commodity prices -world liquidity (loose monetary policy and large US trade deficits) -oil prices high -boom ended with recession -metal prices rose strongly -coffee and cocoa largely sidelined Differences was shorter that Grains led in 1973 and lagged in 2008

5 Economists attributed boom period to the fundamental supply and demand driven factors and non-fundamental demand driven factors such as futures markets two main linkages between the global food markets and spatial effects; -one; supply driven food production mechanisms involve spatially bound food production areas -two; price increases in world food markets have more effects on countries with populations that spend a large share of their budgets on food, implying that these populations are vulnerable based on their current physical locations.

6 Spatial Econometric Model Spatial nested model (spatial lag and spatial error) y Wy X WX W Parameter estimate captures supply and demand functions spatial effects of neighbors on food hunger index Parameter estimate captures spatial effects of omitted variables of neighbors on food security. The reduced form of equation is known as SARAR and is represented below, y ( I W ) 1 [ X ( I W) ].

7 Spatial Weight Matrix -Defines the spatial dependency and heterogeneity among observations -estimate spatial covariance functions that characterize statistical dependencies of variable across countries -The random fields are assumed to be stationary, mixing and isotropic.

8 Road Density: percentage of all the country's Paved roads (measured in length). Data Hunger index (FAO)-difference between the minimum dietary energy and the average dietary energy intake of the undernourished population (food-deprived). Inflation (CPI): Laspeyres formula: Annual (%) change in the cost to the average consumer of acquiring a basket of goods and services that may be fixed or changed at specified intervals, such as yearly. Population Total population in 2006 GDP 2005: Real Gross Domestic Product (GDP) (in billions of 2005 dollars) Exchange rates: Real Exchange Rates (2005 base year)

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10 Exploratory Results- Descriptive Statistics of the variables Std. Variable n Mean Dev. Min Max Hunger Index inflation (CPI_2006) Population (ln)(2006) GDP (2006) Real Exchange_rate 2006 (2005 Dollar) Road_Density Index (1998)

11 Morans I statistics Variable Normality Moran I p-value Hunger Index 1.558* inflation (CPI_2006) Population(2006) GDP (2005) Exchange_rate (2006) Road_Density Index (1998) 3.637*** Signif. codes: 0 *** ** 0.01 *

12 Tests for spatial effects Test p-value Moran's I Z Breush-Pagan test 14.73** LMerror LMlag RLMerror 3.409* RLMlag 3.022* SARMA Rho Lamda n Signif. codes: 0 *** ** 0.01 *

13 Econometric and spatial econometrics estimation results Variable OLS SARAR (GM/IV) Estimate t value Estimate t-value (Intercept) 223.3** inflation (CPI_2006) 1.40E * Population(2006) GDP (2005) Exchange_rate (2006) 0.00E Road_Density Index (1998) -0.81*** ** Lamda Rho Adjusted R 2 : F-statistic 3.68** Breush-Pagan test 14.73** Wald test for both rho and lambda: Signif. codes: 0 *** ** 0.01 *

14 Conclusion The results of no spatial effects on our model are important based this study s initial premise of invoking the global food challenge from a spatial perspective. Moran Is and Lisa Plot and LM tests have showed spatial effects on the variable that are believed to be the main drivers in the food security challenge. These results seem to show that there are spatial effects in the global food challenge. SARAR model has shown better results than those of OLS, implying that after incorporating the spatial effects components the model variables better explain the hunger index.

15 Thank you Questions and Comments/Contributions

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