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<p>This research investigates the impact of oil price fluctuations on food prices in Saudi Arabia between 1979 and 2020 using Nonlinear Autoregressive Distributed Lags (NARDL) methodology. The study employs Augmented Dickey Fuller (ADF) and Phillips Perron (PP) tests to determine the integration order of the variables and Bounds testing to confirm the existence of long run cointegration relationships between each variable. The results indicate that oil shocks influence food prices through several mechanisms. Firstly, the cost of energy increases due to the rise in oil prices, affecting the agricultural commodity market, including farm equipment, food processing, packaging, and distribution costs. Secondly, the demand for agricultural commodities to produce biofuels affects food availability and thus food prices. Thirdly, as an oil-based economy, the oil price shock affects food prices through its impact on government spending, which affects aggregate demand and liquidity. Therefore, Saudi Arabia should adopt appropriate policies to mitigate the impact of oil price shocks on food prices, including investing in renewable energy sources, diversifying its economy, and improving food production and supply chain efficiency. Additionally, implementing appropriate fiscal policies to ensure sufficient budget allocation for food support programs is crucial. However, Investing in groundwater exploration can contribute significantly to the development of Saudi agriculture and to gradually achieving food self-sufficiency.</p>
</abstract>

This research investigates the impact of oil price fluctuations on food prices in Saudi Arabia between 1979 and 2020 using Nonlinear Autoregressive Distributed Lags (NARDL) methodology. The study employs Augmented Dickey Fuller (ADF) and Phillips Perron (PP) tests to determine the integration order of the variables and Bounds testing to confirm the existence of long run cointegration relationships between each variable. The results indicate that oil shocks influence food prices through several mechanisms. Firstly, the cost of energy increases due to the rise in oil prices, affecting the agricultural commodity market, including farm equipment, food processing, packaging, and distribution costs. Secondly, the demand for agricultural commodities to produce biofuels affects food availability and thus food prices. Thirdly, as an oil-based economy, the oil price shock affects food prices through its impact on government spending, which affects aggregate demand and liquidity. Therefore, Saudi Arabia should adopt appropriate policies to mitigate the impact of oil price shocks on food prices, including investing in renewable energy sources, diversifying its economy, and improving food production and supply chain efficiency. Additionally, implementing appropriate fiscal policies to ensure sufficient budget allocation for food support programs is crucial. However, Investing in groundwater exploration can contribute significantly to the development of Saudi agriculture and to gradually achieving food self-sufficiency.

Assessing the Impact of Oil Price Volatility on Food Prices in Saudi Arabia: Insights From Nonlinear Autoregressive Distributed Lags (NARDL) Analysis

ECONOMICS

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

This research investigates the impact of oil price fluctuations on food prices in Saudi Arabia between 1979 and 2020 using Nonlinear Autoregressive Distributed...

Assessing the Impact of Oil Price Volatility on Food Prices in Saudi Arabia: Insights From Nonlinear Autoregressive Distributed Lags (NARDL) Analysis

Published Online: Nov 10, 2023

Page range: 5 - 23

Received: Aug 18, 2023

Accepted: Aug 28, 2023

DOI: https://doi.org/10.2478/eoik-2023-0056

Keywords
Food prices, Oil prices, Real GDP, Nonlinear ARDL, Saudi Arabia

© 2023 Faten Darwez et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Assessing the Impact of Oil Price Volatility on Food Prices in Saudi Arabia: Insights From Nonlinear Autoregressive Distributed Lags (NARDL) Analysis

Published Online: Nov 10, 2023

Page range: 5 - 23

Received: Aug 18, 2023

Accepted: Aug 28, 2023

DOI: https://doi.org/10.2478/eoik-2023-0056

KeywordsFood prices, Oil prices, Real GDP, Nonlinear ARDL, Saudi Arabia

© 2023 Faten Darwez et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Keywords
Food prices, Oil prices, Real GDP, Nonlinear ARDL, Saudi Arabia