Cover IMF Working Papers
Buy Book in Print
Food Prices and the Multiplier Effect of Trade Policy
Author:
Paolo Giordani null

Search for other papers by Paolo Giordani in
Current site
Google Scholar Close
,
Nadia Rocha null

Search for other papers by Nadia Rocha in
Current site
Google Scholar Close
, and
Michèle Ruta
Search for other papers by Michèle Ruta in
Current site
Google Scholar Close
Series:
IMF Working Papers
Volume/Issue:
Volume 2014: Issue 182
Language:
English
Publication Date:
26 Sep 2014
DOI:
https://doi.org/10.5089/9781498320382.001
ISBN:
9781498320382
ISSN:
1018-5941
Pages:
48
Keywords:
WP; staple food; Loss aversion; Trade policy; Multiplier effect; Food crisis; food price; price of food; international price; import tariff; reference price; price change; instrument trade policy utilization; aversion term; food price change; trade measure; world price surge; moving average; Food prices; Tariffs; Imports; Exports; Global
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
Download PDF (1.2 MB) Download Epub
This paper studies the relationship between trade policy and food prices. We show that, when individuals are loss averse, governments may use trade policy to shield the domestic economy from large food price shocks. This creates a complementarity between the price of food in international markets and trade policy. Specifically, unilateral actions give rise to a "multiplier effect": when a shock drives up the price of food, exporters respond by imposing restrictions while importers wind down protection, thus exacerbating the initial shock and soliciting further trade policy activism. We test the key prediction of the theory with a new dataset that comprises monthly information on trade measures across 77 countries and 33 food products for the period 2008-11, finding evidence of a multiplier effect in food trade policy. These findings contribute to inform the broader debate on the proper regulation of food trade policy within the multilateral trading system.
  • Collapse
  • Expand
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund