An Econometric Analysis of Food Security and Related Macroeconomic Variables in Malaysia: A Vector Autoregressive Approach (VAR)

Food security is a concept originated in the mid-1970s. According to the definition of the Food and Agriculture Organization (FAO), food security is a situation that exists when all people, at all times, have physical, social and economic access to sufficient, safe and nutritious food that meets their dietary needs and food preferences for an active and healthy life. At the national level, food security is a situation whereby a country is able to cover the food requirements of its population on a continuous and stable basis. Malaysia, although a middle income country, has been a net food importer in the last four decades. In fact, the country has grown to depend more on imports for most important food especially rice. With these trends lurking, understanding the determinants of food security is important because it will help the policy makers keep abreast of the main variables for food security in Malaysia. This paper thus analyse the dynamic relationship between selected macroeconomic variables (biodiesel production, exchange rate, government expenditure on rural development, Malaysia's GDP, food price index and Malaysia's population) and food security in Malaysia using VAR approach. The variance decomposition also shows that biodiesel production, exchange rate and government expenditure on rural development variables will give the highest shock to food security in year ten. Whereas exchange rate and population in year five and finally GDP in year six. This model is a useful tool and reacts as an effort to better understand how food security reacts and is affected by the integration of domestic and global markets. It could also provide a more quantitative means of assessing food security, and in particular to pinpoint specific variables that explain the highest shock to food security at the national level. It would also benefit to consumers and policy makers.