Food security, prices, and geopolitical risk: A dynamic panel threshold model

What the paper says

Type of the article: Research Article Food security is a major worldwide concern that has received heightened focus due to the COVID-19 pandemic, which disrupted global food supply chains and agri-food value networks. This paper seeks to determine the threshold at which food security is considered vulnerable to geopolitical shifts. Thus, using a dynamic panel threshold model on a sample of 40 countries, covering both advanced and emerging economies, this paper explores the link between food security – measured by the Global Food Security Index (GFSI) and its four key pillars (affordability, availability, quality and safety, sustainability and adaptation) and geopolitical tensions, represented by the Geopolitical Risk Index (GPRI), over the period from 2012 to 2021. The analysis also accounts for key variables such as agricultural land use, the impact of COVID-19, shares of urban population, price levels, and GDP per capita. The main findings indicate that the inflationary impact of geopolitical risk is statistically significant. A point (threshold value) of 0.022 was identified for geopolitical risk, beyond which global food security is substantially weakened due to increased inflation. The findings reveal that geopolitical risks exacerbate price surges across key commodities, including fertilizers, food, and oil, thereby amplifying inflationary pressures arising from fiscal measures taken in response to geopolitical shocks. Moreover, elevated geopolitical risks heighten uncertainty regarding the inflation outlook, complicating trade-offs between monetary and fiscal policies.Acknowledgment This work was sponsored by the Economic Research Forum (ERF) and has benefited from both financial and intellectual support. The views expressed in this work are entirely those of the author(s) and should not be attributed to ERF, its Board of Trustees, or donors.