Optimal Food Price Stabilization in a Small Open Developing Country

This paper analyzes the use of storage and trade policies to achieve food price stabilization in a small open developing country. Optimal stabilization policies are identified using a rational expectations storage model with risk-averse consumers and incomplete markets. Without public intervention,...

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Main Authors:	Gouel, Christophe, Jean, Sébastien
Format:	Journal Article
Language:	en_US
Published:	Oxford University Press on behalf of the World Bank 2016
Subjects:	food security price stabilization volatility food storage public purchases domestic market international market public finance safety nets
Online Access:	http://hdl.handle.net/10986/24604

id	okr-10986-24604
recordtype	oai_dc
spelling	okr-10986-246042021-04-23T14:04:23Z Optimal Food Price Stabilization in a Small Open Developing Country Gouel, Christophe Jean, Sébastien food security price stabilization volatility food storage public purchases domestic market international market public finance safety nets This paper analyzes the use of storage and trade policies to achieve food price stabilization in a small open developing country. Optimal stabilization policies are identified using a rational expectations storage model with risk-averse consumers and incomplete markets. Without public intervention, price dynamics are driven by domestic productive shocks and international prices. On its own, an optimal storage policy is found to be detrimental to consumers because its stabilizing benefits leak to the world market. In contrast, an optimal combination of storage and trade policies results in a powerful stabilization of domestic food prices. However, such an optimal combination is shown to entail two serious drawbacks: its distributive impacts are large compared to its efficiency benefits, and by distorting excess supply curves, it may aggravate high world price episodes. 2016-07-05T17:51:15Z 2016-07-05T17:51:15Z 2015-01 Journal Article World Bank Economic Review 1564-698X http://hdl.handle.net/10986/24604 en_US CC BY-NC-ND 3.0 IGO http://creativecommons.org/licenses/by-nc-nd/3.0/igo World Bank Oxford University Press on behalf of the World Bank Publications & Research :: Journal Article Publications & Research
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	en_US
topic	food security price stabilization volatility food storage public purchases domestic market international market public finance safety nets
spellingShingle	food security price stabilization volatility food storage public purchases domestic market international market public finance safety nets Gouel, Christophe Jean, Sébastien Optimal Food Price Stabilization in a Small Open Developing Country
description	This paper analyzes the use of storage and trade policies to achieve food price stabilization in a small open developing country. Optimal stabilization policies are identified using a rational expectations storage model with risk-averse consumers and incomplete markets. Without public intervention, price dynamics are driven by domestic productive shocks and international prices. On its own, an optimal storage policy is found to be detrimental to consumers because its stabilizing benefits leak to the world market. In contrast, an optimal combination of storage and trade policies results in a powerful stabilization of domestic food prices. However, such an optimal combination is shown to entail two serious drawbacks: its distributive impacts are large compared to its efficiency benefits, and by distorting excess supply curves, it may aggravate high world price episodes.
format	Journal Article
author	Gouel, Christophe Jean, Sébastien
author_facet	Gouel, Christophe Jean, Sébastien
author_sort	Gouel, Christophe
title	Optimal Food Price Stabilization in a Small Open Developing Country
title_short	Optimal Food Price Stabilization in a Small Open Developing Country
title_full	Optimal Food Price Stabilization in a Small Open Developing Country
title_fullStr	Optimal Food Price Stabilization in a Small Open Developing Country
title_full_unstemmed	Optimal Food Price Stabilization in a Small Open Developing Country
title_sort	optimal food price stabilization in a small open developing country
publisher	Oxford University Press on behalf of the World Bank
publishDate	2016
url	http://hdl.handle.net/10986/24604
_version_	1764457163992858624

Optimal Food Price Stabilization in a Small Open Developing Country

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