Do FDI inflows and energy price affect the food import dependency in developing countries? Evidence from panel VAR Models

After the global food crisis of 2007-2008, the dependency of developing countries on food imports has been revived in the economic debates. The ability of a country to import food depends on several factors. Considering food security as a priority issue, we focus in this paper on the FDI inflows and the energy price as a determinant of food import dependency. Indeed, on the one hand FDI as a substitute/complement to trade flows could impact the depending nation. On the other hand energy prices affect production and transport costs, thereby impacting international trade in food productions. To investigate this relationship, we follow the methodology of Love and Zicchino (2006) by estimating a panel vector autoregressive (PVAR) of 40 developing countries for the period between 1990 and 2012. The results show that FDI inflows leads to food import dependency in upper middle income countries and energy price leads to dependency in upper-middle income countries.