Modeling the influence of foreign investments on food security based on panel cointegration models

Abstract

The paper studies the problems of food security as the basis for the stability of the country’s economic development. Despite the economic growth of most countries in the world, the problems of hunger continue to be acute in developing countries. This undermines the food security of these countries and can pose a threat to world peace as a whole. Numerous studies show that foreign investment plays an important role in the creation of food security, but this effect is ambiguous. The most common methods of analysis in recent researchеs are descriptive analysis and panel data models. In this article, our approach to analyzing the impact of foreign investment is based on panel cointegration models; the interpretation of the results uses the impulse response function based on an error correction model. Countries of North Africa are considered as an example of the implementation of this approach. Data from the World Bank and the Food and Agriculture Organization for 1991–2014 for seven countries (Algeria, Egypt, Libya, Morocco, Sudan, Tunisia, Western Sahara) were selected for analysis. In this paper, we have also tested the methodology for selecting the food security indicator based on analysis of the matrix of cointegration relations. The results show that foreign investment has a significant long-term impact on food security, but in the short term no effect was detected. The proposed modeling methodology can be extended to any region of the world to monitor and evaluate the effectiveness of the current economic policy to combat hunger and poverty.