Policy Briefs

Measuring Food Price Volatility in Georgia
Monday, 02 May, 2016

An average Georgian household spends more than 40% of its budget on food. Food prices are important determinants of access to food and stability of food security.

In order to assess the stability of prices, the paper looks at food price volatility for major commodities (not restricted to primary commodities only) consumed by Georgian households. Price volatility is important because both low and high prices affect different stakeholder groups (producers, consumers, exporters, etc.) in different ways.

The aim of this paper is to study food price volatility and identify its main drivers keeping in mind that not all types of volatility are problematic. Seasonal volatility for example might not be an issue, whereas unpredictable volatilities not driven by fundamental market forces are usually problematic (FAO et al. 2011). Another objective of the paper is to identify the most risky and less risky crops for producers to invest in and contribute to the policy on food security of Georgia as well as agricultural policy in general.

Paper examines the effect of lagged prices, GDP, exchange rate, oil price, and time trends on the price of the commodity and variance of this price. The analysis is performed for selected commodities (potato, milk, cheese). All the variables significantly affect the variance in commodity prices.

Since September 2014, the ISET Policy Institute has been working with the German Economic Team (GET). In May 2015 ISET-PI and GET extended their partnership and began working on a variety of policy briefs for Georgia's industrial development. These briefs will simultaneously advance research in the sector and provide the Georgian government a set of guidelines for the development of its own policy, exploring where Georgia's comparative advantages lie. The German Economic Team is a consulting group that provides advisory services to the Georgian government on economic policy and is supported by the German Federal Ministry for Economic Affairs and Energy.