ABSTRACT

We examine why domestic food prices in the Philippines, especially rice, have remained high despite falling global prices and trade liberalization. Using a Vector Error Correction Model and Structural Vector Autoregressive framework, we analyze price movements across retail, wholesale, and farmgate levels over the past two decades. Results show limited pass-through from international prices to local markets, indicating downward price rigidity. We pinpoint potential contributing factors, including speculative behavior, weak competition, and structural and regulatory barriers resulting in shocks to stocks and imports. Historical decomposition reveals the increasing influence of wholesale price shocks and inventory fluctuations on domestic price trends. The findings underscore the importance of integrating trade reforms with robust competition policies and effective market governance to manage inflation and improve food security in the market.

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