The Effects of Ramadan on Prices : a Comparison Between 3 Countries (Marocco, Senegal, Tunisia)

THE EFFECTS OF RAMADAN ON PRICES : A COMPARISON BETWEEN 3 COUNTRIES (MAROCCO, SENEGAL, TUNISIA)

Modou Ndour FAYE Béchir MAGHRABI, Adnen LAOUSSED Amal MANSOURI,

Dominique LADIRAY 1

Modou Ndour FAYE, Head of the Quarterly Accounts and Analytical Studies Ofﬁce, National Agency for Statistic and Demography, [email protected];

Adnen LAOUSSED, General Director of Statistics Tunisia, [email protected];

Béchir MAGHRABI, Director of the Context, Statistics Tunisia, [email protected];

Amal MANSOURI, Head of Socio-Economic Information Division, National Institute of Conjunc- ture Analysis, [email protected];

Dominique LADIRAY, former head of the Short Term Statistics Department, National Institute of Statistics and Economic Studies , France, [email protected];

LAST REVISED : SEPTEMBER 2019

1. All the views expressed in this paper belong to the authors and do not represent those of the National Agency for Statistics and Demography, Statistics Tunisia, National Institute of Business Analysis and the National Institute of Statistics and Economic Studies. 2

THE EFFECTS OF RAMADAN ON PRICES : A COMPARISON BETWEEN 3 COUNTRIES (MAROCCO, SENEGAL, TUNISIA)

Abstract

Ramadan is characterized by an increase in household consumption expenditure in many countries, which is accompanied by more marked price changes, especially those of foodstuffs. This paper aims to study and compare the effects of Ramadan on prices in three Muslim-dominated countries : Morocco, Senegal and Tunisia. The estimation methodology is based on the RegARima models taking into account the speciﬁc regressors to the national calendars of the 3 countries. The common estimation period is 10 years. The estimation results on the basic indices of consumer prices show that the effects of Ramadan on food prices are, on the whole, signiﬁcant at the level of the three countries, but tend to undergo unstable changes during the study period.

Keywords : Seasonal adjustment, Calendar effects. JEL Classiﬁcations : C22 3

1 Introduction

Ramadan, the ninth month of the Hijri calendar, corresponds to the period of fas- ting among Muslims and is characterized by a change in household consumption habits compared to other months of the year. Most often the breaking of the fast, which takes place at sunset, is done in family, around traditional dishes and delica- cies. Ramadan is also characterized by a rise in speciﬁc purchases of clothing and some household equipment, in view of the holiday of Aid el-Fitr which reﬂects the end of Ramadan.

The increase in household spending observed during the month of Ramadan is accompanied by significant changes in consumer prices, especially those of food products. Stylized facts indicate that consumer prices are significantly higher during Ramadan in different Muslim countries. Unfortunately, these measures have never been compared. The main objective of the article is to conduct a comparative analysis of the effects of the month of Ramadan on consumer prices in three Muslim countries (Morocco, Senegal, Tunisia). The first step is to homogenise the nomenclatures of the price indexes , use a common method of estimation taking into account the specificities of the calendar of each country and study the conver- gences and divergences in terms of effects between the 3 countries.

The paper is divided into four sections. The first will present succinctly studies that have focused on the effects of the Hijri calendar. The second section will deal with the specificities of the effects of the calendar and will present a reminder of the methodology of their estimation. Empirical results and interpretive grids through the study and comparative analysis of country-specific effects will be discussed in the last section.

2 Literature review

Empirically, many studies have been conducted, but the general trend is that the approaches used to measure the effects of Ramadan on economic activity were based on time series and econometric models. Thus Ladiray and al (2009) showed the 4 existence of the effects of the month of Ramadan on sectorial activity in Tunisia, using the model proposed by Hillmer and Bell (1983). In the same context, El- Guellab and al (2013) showed the impact of the month of Ramadan on food prices and rail transport in Morocco, while retaining the basic model proposed by Young (1965).

Bukhari and Jalil Abdul (2011) used an econometric approach to demonstrate the positive effect of Ramadan on mass money holdings and on the reduction of depo- sits in Pakistan. Norhayati and Lazim (2011) analyzed and attested to the effects of the holiday seasons, Aid el- Fitr, Chinese New Year and deepvall on activity in Ma- laysia, retaining an econometric speciﬁcation with 3 types of regressors. Riazuddin and Khan (2002) demonstrated that foreign currency holdings are directly or indi- rectly affected by seasonal variations related to the Hijri and Gregorian months. Jin Lung Lin and Tian Syh Liu (2002) modeled the effects of the Hijri calendar holidays for Taiwan using regressors for each type of holiday. They had proved that seasonal factors could not be determined effectively if the effects of the Hijri calendar were not taken into account.

Amrani and Skalli (2008) evaluated the mobile seasonality due to the lunar calendar on Moroccan time series using a state space model. They concluded that Ramadan had a negative impact on passenger trafﬁc.

3 Speciﬁcities and typology of calendar effects

Ramadan is the ninth month of the Hijri calendar that punctuates activity in many Muslim countries. The ofﬁcially calendar in most Muslim-dominated countries is the Gregorian calendar. However, the consumption habits and lifestyle of the inhabitants continue to evolve in line with the festivities of the Hijri calendar where the year is 10 days less than the Gregorian year.

3.1 Speciﬁcities of the Gregorian and Hijri calendars The Gregorian calendar is a calendar based on the movements of the earth around the sun. Consisting of 12 months, the tropical Gregorian year is closer to the solar 5 year, with an average duration of 365,2435 days. This reconciliation was achieved by adding 97 days every 400 years. Leap years, which include an additional day added in February, are divisible by 4 or multiples of 400 years, with the exception of the centennial years. Thus, the years 1900, 2100, and 2200 are not leap years but 1600, 2000, and 2400 are leap years.

The Hijri calendar is a 12-month lunar calendar, with an average duration of 29,530,589 days. The common Hijri year has 354 days remaining 0.367068 days lower than the synodic lunar year. Thus, and in order to preserve a similar reproduction of the calendar, were added 11 days every 30 years. The number of common hijri years is 19 during a 30-year cycle, while 11 years have an extra day and are commonly known as abundant years.

The determination of the rank of abundant years has been highlighted through several algorithms, including the standard version which retains the years ranked in order 2, 5, 7, 10, 13, 16, 18, 21, 24, 26 and 29 as abundant years. The Kuwaiti algorithm is slightly different from the standard version, retaining the 15th instead of the 16th year. A difference of one day can be recorded in some months over two years. The Indian tables consider the years ranked in order 2, 5, 8, 10, 13, 16, 19, 21, 24, 27 and 29.

The overlapping of the two calendars (solar and lunar) and the differences made on the occasion of the advent of the new lunar month lead to differences in terms of working days and holidays. As an illustration, the beginning of the month of chawwal 1426, Eid el-Fitr’s day of celebration, corresponded to :

• Wednesday, 2 November 2005 in Libya and Nigeria;

• Thursday, November 3, 2005 in 30 countries including Algeria, Tunisia, Egypt, Saudi Arabia and part of the United States;

• Friday, November 4, 2005 in 13 countries including Morocco, Senegal, Iran, Bangladesh, South Africa, Canada, part of India and part of the United States; 6

• Saturday, November 5, 2005 in a part of India.

These differences reflect the need to build a specific calendar for each country, in particular to capture the specificities in terms of calendar effects and facilitate comparisons within and between countries

3.2 Typology of calendar effects The effects of the calendar include movements related to the evolution and composition of the calendar, in particular :

• Seasonality : some of the ﬂuctuations related to the effects of the calendar are taken into account in seasonal variations. Thus, although the effect of civil holidays is not identical, taking into account a different monthly composition of weeks, some of this effect is captured through seasonal ﬂuctuations, because of its repetitive coincidence with the same month;

• The length of the month : the months that have a higher number of days (31, instead of 30 or 28) experience greater variations in activity compared to shor- ter months;

• The day effect of the week related to the number of days of each type (Sunday to Thursday ...) in each period. The same month can have for example 4 or 5 Saturdays;

• Public holidays : most holidays are linked to a date and not to a day (Indepen- dence Day, Labor Day, etc.);

• The effect of mobile events taking into account the effect of the festivities whose date changes over time, such as Eid el-Fitr, etc.;

• The effect of Ramadan which constitutes a particular calendar effect requiring a speciﬁc treatment in order to capture it. 7

4 Methodology for estimating the effects of Ramadan

In general terms, the global model for estimating calendar effects, including the Ramadan model, refers to a Reg-ARIMA type speciﬁcation (ARIMA error regres- sion model) whose form is as follows :   Xt TDt MHt Ot Zt  = + + + Z TC S I t = t + t + t   Zt follows a model ARIMA(p,d,q)(P,D,Q)s

With : Xt : gross series, TD : vector of working days, MH : vector of events and moving holidays (Passover, Ramadan, Chinese New Year, etc.), O : vectors of out- liers, TC : trend-cycle, S : seasonality and I : Irregular component.

The construction of regressors for trading days and mobile events requires the iden- tiﬁcation of public holidays (civil holidays including occasional holidays, religious festivals and others). It also requires other parameters, in particular those relating to the reference date of the concordance between the Gregorian and lunar calendars, the sequence of abundant years in the thirty-year cycle and the duration of lunar months.

5 Empirical Analysis

5.1 Data sources The analysis of the effects of the month of Ramadan on consumer prices was conducted by referring to the consumer price indices of the three countries (Mo- rocco, Senegal,Tunisia). These indices come respectively from the databases of the High Commission for Planning in Morocco, the National Agency of Statistic and Demography of Senegal and the Agency of Demography and Statistics of Tu- nisia. The base years of these indices are respectively 2006, 2008 and 2010 for the 3 countries. The estimation period runs from January 2007 to September 2018 for Morocco, from January 2009 to December 2018 for Senegal and from January 2000 to September 2018 for Tunisia. 8

Due to the cultural and economic diversities of the three countries, harmonization work has been carried out with the aim of constructing a common IPC nomenclature for a better comparison of the effects of Ramadan among the three countries. Thus, a grouping of 104 common products for the three countries has been done. This grouping was done taking into account the reconciliations in terms of household basket level of the 3 countries.

TABLE 0.1 – Mobile Religious Feasts by Country

Events Date Marocco Tunisia Senegal Ras El Am 01 Muharram 1 1 Achoura 10 Muharram 1 Magal de Touba 18 Safar 1 Mawlid 12 Rabia al awal 2 1 1 (Gamou) Mawlid (Baptême) 18 Rabia al awal 0 Ramadan 01 Ramadan (29) (29) (29) Aïd el-Fitr 01 Chawwal 2 2 1 (Korité) Aïd el-Agha 10 Dhou al-hijja 2 2 1 (Tabaski)

5.2 Main Results

Effects of Ramadan on prices in Morocco

During the month of Ramadan, the food and culinary habits of Moroccans change with the preparation of dishes specific to the festivities that mark the period of breaking the fast (from sunset to dawn). The composition of meals is geared towards foods that are higher in carbohydrates, proteins and lipids. Expenditures on food consumption are significantly higher than in other months of the year, to the detriment of some non-food items such as furniture and tourism. According to the standard of living survey conducted by the HCP in 2007, urban and rural household food expenditure increased by 13.2% and 19.3%, respectively, compared with the monthly average. These increases are accompanied by increases in the retail prices of food products, as evidenced by the results in Table 2. In particular, prices of pastry and cakes, beef, fresh fish, cheese, eggs, dates and dried fruits are the most significant increases. 9

On the other hand, the prices of pulses and fresh vegetables, which constitute the basis of soups prepared for the breaking of fast, do not increase signiﬁcantly, particularly because of the abundance of local supply. Poultry and dairy prices are also not undergoing much change, thanks in part to the government’s commitment to provide sufﬁcient local market supply. As a result, imports of dairy products and milk are increasing in the last month before Ramadan.

Excluding food, the effects of Ramadan on prices remain mixed. While women’s and children’s clothing and footwear prices are rising significantly during the second half of Ramadan, in response to stronger demand on the eve of the Aid-Fitr holiday, the prices of women’s and children’s clothing and footwear are rising significantly of the second fortnight in Ramadan , furnishings are trending down- ward, reflecting, in part, adjustments in household spending on food. Prices for tourism and other accommodation services also fell during the month of Ramadan, which coincides with a steady decline in tourist overnight stays. This phenomenon can be explained by the closure of most restaurants and leisure activities during the day.

TABLE 0.2 – Signiﬁcance* at 10% of effect of Ramadan on consumer prices

Source : Our calculations 10

Effects of Ramadan on prices in Senegal

During the month of Ramadan, the consumption habits of Senegalese undergo a slight modification with an improvement of the contents of the dishes and introduction of a new dish before dawn. This dish is usually made with flour and semolina. F.Ndoye (2001) shows that the consumption of flour-based dishes such as "fondue", "caakry", "ngalakk" is very important during the month of Ramadan compared to the months of the year, which explains the noted effects of semolina flour prices during the first half of the month of Ramadan.

The Prices of "beef" and "poultry" increase in the second half of the month of Ramadan, at the same time as their consumption. In Senegal, the breaking fast also favors the craze for certain products such as dates, cakes and biscuits, followed by traditional juices. This month encourages the increase in the prices of "biscuit cakes" and fresh juices following the increase in their demand. On the other hand, cheese prices are down during the second half of the month of Ramadan. The other food products undergo price changes during the month of Ramadan thanks to the effort of the Senegalese government which carefully ensures the correct supply of certain foodstuffs and staples and ﬁnally to maintain price stability during the month of Ramadan.

Excluding food, the effects of Ramadan on prices remain distinct in Senegal. The prices of children’s and women’s shoes show a signiﬁcant increase respectively during the month of Ramadan, especially during the second fortnight. On the other hand, a drop in the price of food services, cafes and accommodation services is noted during the second half of the month of Ramadan.

Effects of Ramadan on prices in Tunisia

Tunisian eating habits change also during the month of Ramadan and the consumption of some products increases signiﬁcantly, which inevitably impact their prices.

For most Tunisians, dates and fresh milk are the favorite products for breaking fast. In addition the majority of meals throughout the month are made up of eggs and 11 cheeses such as Tajine, Brik, Salad. The evening is always animated by fruits and pastries. As a result the ﬁrst fortnight is marked by rising prices of essential food products for the Tunisian table such as eggs especially traditional, cheeses, beef and salted vegetables.

On the other hand, in the second half of Ramadan, prices for the products needed for preparations for Eid El Fitr are increasing. In particular the prices of traditional pastries like Makroudh or Baklawa. In addition, fish dishes are the most popular at Eid El Fitr, especially since Tunisian families traditionally prepare salting fish. And towards the end of the month, clothing purchases intensify. In spite of the fact that the price increase is not significant on the whole clothing item, it remains very significant on price sub-items like trousers for girls or men’s suits.

The month of Ramadan does not only have a positive effect on prices, prices for accommodation services, restaurants and other similar establishments are decli- ning as a result of the drop in demand, while overnight stays are falling and several institutions are closing in this month. The impact of the month of Ramadan and Eid on prices is tangible despite the fact that several products have an administered price and the state is making a considerable supply effort to have a buffer stock to curb the slippage in prices.

Comparative analysis of the effects of Ramadan on prices Morocco, Senegal Tunisia

The effects of Ramadan on consumer prices were more important in Morocco than in Tunisia or Senegal (see Graphic 1). Ramadan would cause a rise of between 0.24% and 10.7% of the prices of certain food products, instead of a maximum of 2.5% and 3.3% respectively for the Tunisia and Senegal. These fluctuations are part of the dynamics of household food demand and reflect, in part, disparities in terms of public price regulation at the level of the three countries. In fact, if, on the whole, the prices administered by the Moroccan State do not exceed 19 products and services, of which only two are of the food type, the list of prices subject to supervision or approval at the stage of production or the sale retains 55 products in Tunisia, of which 24 are food. In Senegal, although food prices are liberalized, with 12 the exception of bread, wheat flour, crystallized sugar, and edible oil, governments often intervene to relocate certain products which are experiencing strong cyclical demand (Ramadan) under temporary administrative fixation.

FIGURE 0.1 – Effects of the Ramadan on consumer prices (%)

The results of the study also showed differences in terms of the evolution of Ra- madan’s effects on prices in the 3 countries. The simulation exercise, carried out over the last 7 years by gradually introducing an observation made at the end of the sample, highlights other stylized facts. The effects of Ramadan on prices tend, in fact, to increase over time in Tunisia and Senegal. By way of illustration, the estimated coefficients of the effects of Ramadan on the prices of fresh fish, cheese, dates, pastry and cakes and flour and semolina have experienced a rising trend over the course of 7 years of simulation. Similarly, the estimated coefficients for fresh fruits, date and pastry and cake prices increased in Senegal during the simulation period, although they remained insignificant. In Morocco, on the other hand, there was a slight trend reduction in the effects of Ramadan on food prices with the exception of fresh fruit, which was on the rise during the simulation period. 13

FIGURE 0.2 – Evolution of the ramadan pa- FIGURE 0.3 – Evolution of the ramadan pa- FIGURE 0.4 – Evolution of the ramadan pa- rameter relating to the CPI of pastry and cakes rameter relating to the CPI of pastry and cakes rameter relating to the CPI of pastry and cakes in in Morocco(statistic simulation over the period in Senegal (statistic simulation over the period Tunisia(statistic simulation over the period 2012- 2012-2018) 2013-2017) 2018)

The differences in terms of the signiﬁcance and evolution of the effects of Rama- dan on prices at the level of the three countries mask, however, a certain similarity in terms of sensitivity. The correlation examination of the estimated coefﬁcients for 15 selected products showed a strong correlation (0.86) between the effects recorded in Morocco and Tunisia. Overall, the 3 countries experienced an increase in the prices of some food products during the month of Ramadan. There is there- fore a strong trend towards convergence of food consumption levels between the 3 countries. This phenomenon could come from the homogenization of food practices, which are increasingly subject to internationalization, particularly with the gradual improvement of the use of new technologies.

FIGURE 0.5 – Correlation between the estimated FIGURE 0.6 – Correlation between the estimated co- coefﬁcients of the Ramadan effects price (Senegal- efﬁcients of the Ramadan effects price (Marocco- Tunisia) Tunisia) 14

Conclusion

In this article, we have recalled the principles of construction of the regressors concerning the calendar of the Hijri.A preview was given for both calendars (Gre- gorian and Hijri). The data used in this exercise are from the consumer price indices of the three countries. In view of the difference noted in the three countries, a common nomenclature of 104 products of the consumer price index was adopted.

The objective of this study was to measure the effects of Ramadan Month on prices and to make a comparative analysis between the three countries : Morocco, Senegal and Tunisia. The study was conducted considering the calendar of the hijri of each country. Similarities were noted with regard to the effects of Ramadan at the level of the three countries. For example, cake confectionery prices rise to a level of three during the month of Ramadan.

On the other hand, the study showed price movements linked to sometimes different cultural practices between countries. In Morocco, dates are traditionally served at the time of the breakup of the young. In Senegal, for the dawn meal, traditional dishes (tiakry, ngalakk, based) are prepared with ﬂour and semoule. For Tunisia, the consumption of brick (eggs, cheese, etc.) is very important during the month of Ramadan. 15

Annexes

TABLE 0.3 – Ramadan ﬁrst half effects on prices

Source : Our calculations

TABLE 0.4 – Ramadan second half effects on prices

Source : Our calculations 16

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