The Experience of Food Inflation Across the EU. (Transparency of Food Pricing (TRANSFOP) Working Paper 5).

Abstract

The background to the TRANSFOP research project can be traced to the global commodity price surge of 2007 and 2008 with world prices of many agricultural and energy commodities rising, in nominal terms, to record levels. Although world prices fell back in 2009, by 2011, world commodity prices again rose and exceeded the peak levels recorded in 2008. The domestic impact of these events on global markets was reflected in higher levels of food price inflation though, despite the apparently ‘common’ nature of the global shocks, the effect on domestic food price inflation varied markedly across countries. This was perhaps most noticeable in the experience of many developing countries and certainly when contrasting the experience of emerging and developing economies with advanced economies. The general reasons for this broad experience can readily focus on the use of government policies via domestic intervention, the use of safety nets and changes in border measures (FAO, 2009). However, the experience of food price inflation has varied considerably across advanced economies and is also apparent among EU countries. Accounting for this poses significant challenges: given the existence of common trade and agricultural policies across the EU and the existence of the ‘single market’, why should the food inflation experience vary across EU countries? Identifying the factors that potentially determine the links between what happens on world markets and the resulting effect on domestic retail food prices is a key overall aim of the TRANSFOP project.