Determinants of food prices and their inflationary effects: A study on OECD countries

Inflation is one of the most significant economic problems as it leads to a deterioration in individuals' purchasing power, especially affecting those with fixed incomes and low-income individuals more negatively. On the other hand, the high weight of food inflation within general inflation further complicates the fight against inflation. In this context, studies aimed at identifying the determinants of food prices and developing policy recommendations are gaining importance in the literature. The aim of this study is to examine the determinants of food prices and analyze their effects on food inflation. Based on the period from 2000 to 2020, and using a sample of OECD countries, the analysis is carried out using classical panel analysis, panel ARDL, panel NARDL, and the Granger causality model based on the GMM panel VAR model. The findings show that the most influential variable on food inflation is the energy inflation variable. Increases in energy prices raise food inflation. Similarly, the real GDP per capita variable also positively affects food inflation. This indicates that an increase in income creates demand, leading to an increase in food prices. The real effective exchange rate, while having a lower impact compared to the other two variables, also has a negative effect on food inflation.