Assessing the transmission of global market volatility to Moroccan food prices: a VECM-based analysis with forecast error variance decomposition

Purpose This paper examines the transmission of global food (GF) and global energy (GE) volatilities to the Moroccan food market, focusing on both aggregated and specific commodities such as dairy, meat and oils and fats. Design/methodology/approach Using monthly data from September 2009 to June 2024, a vector error correction model (VECM) was estimated to capture short-run and long-run dynamics. The analysis is complemented by impulse response functions (IRFs) and forecast error variance decomposition (FEVD) to provide insights into the transmission mechanisms. Findings The results indicate an increased sensitivity of the Moroccan food market, particularly following the 2021 price spikes. The study identifies energy input costs, particularly related to fertilizers and transportation, as primary transmission mechanisms. Additionally, the real effective exchange rate (REER) also significantly influences the Moroccan food market. Research limitations/implications Further research could explore the transmission from oil derivatives, such as gasoline and fuel, which are directly used in agricultural activities, to provide a more comprehensive understanding. Social implications Understanding the transmission of global shocks to domestic markets can help in developing strategies to enhance food security and protect consumers from price volatility. Originality/value This study contributes to the literature by comprehensively analyzing the direct and indirect transmission mechanisms from global food and energy markets to the Moroccan food market, with policy implications to enhance price stability.