Food Price Shocks and Household Consumption in Developing Countries: The Role of Fiscal Policy

Author/Editor:

Carine Meyimdjui ; Jean-Louis Combes

Publication Date:

January 15, 2021

Electronic Access:

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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.

Summary:

This paper studies whether fiscal policy plays a stabilizing role in the context of import food price shocks. More precisely, the paper assesses whether fiscal policy dampens the adverse effect of import food price shocks on household consumption. Based on a panel of 70 low and middle-income countries over the period 1980-2012, the paper finds that import price shocks negatively and significantly affect household consumption, but this effect appears to be mitigated by discretionary government consumption, notably through government subsidies and transfers. The results are particularly robust for African countries and countries with less flexible exchange rate regimes.

Series:

Working Paper No. 2021/012

Frequency:

regular

English

Publication Date:

January 15, 2021

ISBN/ISSN:

9781513566887/1018-5941

Stock No:

WPIEA2021012

Format:

Paper

Pages:

25

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