IMF Working Papers

Food Prices and the Multiplier Effect of Trade Policy

By Paolo Giordani, Nadia Rocha, Michele Ruta

September 26, 2014

Download PDF More Formats on IMF eLibrary Order a Print Copy
More formats on IMF eLibrary Order a Print Copy

Preview Citation

Format: Chicago

Paolo Giordani, Nadia Rocha, and Michele Ruta. "Food Prices and the Multiplier Effect of Trade Policy", IMF Working Papers 2014, 182 (2014), accessed May 19, 2025, https://doi.org/10.5089/9781498320382.001

Export Citation

  • ProCite
  • RefWorks
  • Reference Manager
  • BibTex
  • Zotero
  • EndNote
Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Exports, Food prices, Imports, International trade, Prices, Tariffs, Taxes, Trade policy

Keywords: Aversion term, Exports, Food crisis, Food price, Food price change, Food prices, Global, Import tariff, Imports, Instrument trade policy utilization, International price, Loss aversion, Moving average, Multiplier effect, Price change, Price of food, Reference price, Staple food, Tariffs, Trade measure, Trade policy, World price surge, WP

Publication Details

You May Also Be Interested In...

Pakistan: First Review Under the Extended Arrangement Under the Extended Fund Facility, Requests for Modification of Performance Criteria and Request for an Arrangement Under the Resilience and Sustainable Facility -Press Release; Staff Report; and Statement by the Executive Director for Pakistan

May 17, 2025

The Rise and Retreat of US Inflation: An Update

May 16, 2025

Nowcasting Global Trade from Space

May 16, 2025

Harnessing Angola’s Non-Oil Economic Growth: Economic Diversification in Angola

May 13, 2025