Oil price, economic policy uncertainty and food prices in oil-exporting and oil-importing developing economies

Fluctuations in domestic food prices raise significant concerns about food and national security in developing countries. Previous studies established the link between oil prices and rising food prices, but the influence of economic structure and global economic uncertainties received less attention. Using monthly data from 2000:01 to 2023:11 and the cross-sectional dependence autoregressive distributed lag model, we examined the effect of oil prices and economic policy uncertainty (EPU) on domestic food prices in 41 developing countries based on aggregate and disaggregate analyses. The empirical findings indicate that, while oil prices and EPU comove with food prices in the short run, oil price drives domestic food prices in the long run in oil-importing countries. This is valid for high-income oil-importing countries and low-income oil-exporting countries where both short- and long-run effects are ascertained. In addition to global oil prices, EPU is another channel which explains the dynamics of domestic food prices in developing countries. Therefore, the link between oil prices, EPU and food prices in developing countries is explained by the countries' economic structures, timing/period under consideration and the transmission channels associated with global uncertainties. We proffer some policy suggestions based on the empirical findings.