Macroeconomic Effects of Food Price Shocks in the MENA Region

Abstract

The global food market is complex and places several challenges for policymakers specifically the issue of sudden changes in food prices. These shifts in prices not only challenge policymakers but also propose severe consequences for economies that are not self-sufficient and rely on food imports to meet their food demand. Given all the challenges, using the Structural Vector Autoregressive Model, this thesis focuses on revealing how the different macroeconomic variables of major oil-exporting countries (Algeria, Bahrain, Libya, Oman, Qatar, Saudi Arabia, and the United Arab Emirates) and the non-major oil-exporting countries (Jordan and Morocco) in the MENA region respond to these types of shocks. In addition, this thesis aims to identify ideal policies the government should implement to adjust and resist such shocks. The findings of this paper suggest that net- food-importing and non-major oil-exporting countries align in the direction of responses to surges in food prices. As for the major exporting economies, the responses differ over time and by country; however, these economies all showed the ability to absorb the severity of the shock at higher levels than the non-major oil-exporting. As for the government responses, the research revealed the need to tailor policies based on the specific circumstances of each economy. Yet, sustainable agriculture practices, maintaining food reserves, and stabilization policies are necessary for any economy.