Food Prices and Inflation Rates: Relationships in the East African Community (EAC)
Journal Title: International Journal of Humanities and Social Science Invention - Year 2018, Vol 7, Issue 3
Abstract
Fuel and food prices are two of the important factors explaining inflation situation in the East African Community (EAC). Recently with the decline in fuel prices more concern in the EAC member states has been on food prices. This is because rising food prices have serious effects on food access and poverty levels in the region. But, food access situation has not been the same in the EAC member states as there are food surplus and food deficit countries among them. Moreover, there are studies that indicate inflation is detrimental to growth and household welfare if it reaches particular thresholds while household economic situation is exacerbated when staple food prices are rising. This paper tries to find out whether inflation rates and food prices move together in the EAC countries. For this purpose, bivariate correlations are used to analyze the relationship; between inflation rates (CPI), between food prices and between inflation rates and food prices in the EAC countries and test the significance of the values of Pearson correlation coefficients. Data used are inflation rates (CPI) for the period 1997-2016 from the African Development Bank (AFDB) and food price index from EAC Secretariat. Results show that inflation rates and food prices are positively highly correlated and markets in key staple food items are more integrated in the EAC countries. This has important policy implications to controlling inflation and stabilization of food prices through trade and increased regional supply of food. This contributes to improve affordability and food access situation and the paper recommends strengthening regional integration initiatives and implementation of agreed negotiations in order to move to a higher form of economic union where macroeconomic policies in general and policies that target inflation and food security in particular are coordinated.
Authors and Affiliations
Ghiorgis Tekle
Keywords
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