Global Commodity Inflation Pass-through: Vulnerability of Small Island Developing States
IMF Working Papers, July 4, 2025
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- Global Commodity Inflation Pass-through: Vulnerability of Small Island Developing States
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Bibliographic details
- Authors: Laron Alleyne, Patrick Blagrave
- Published: July 4, 2025
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798229016148.001
Overview
- Study examines vulnerability of inflation in Small Island Developing States (SIDS) to global food and fuel inflation changes using a panel of 168 countries, including 31 SIDS.
- Empirical approach: local projections methodology of Jordà (2005).
Key findings
- Inflation in SIDS is nearly twice as responsive to international food commodity inflation shocks as in non-SIDS counterparts.
- Evidence of asymmetry in food inflation pass-through: food-inflation increases have larger pass-through than equivalently sized food-inflation decreases.
- For shocks to international crude oil inflation, the disparity between SIDS and non-SIDS is less apparent.
- Results hold even when including country-specific fixed-effects and other control variables, most notably the weight of food and oil in a country’s CPI basket.
Robustness and controls
- Findings are robust to inclusion of:
- country-specific fixed-effects
- control variables, including the weight of food and oil in a country’s CPI basket
Interpretation and mechanisms
- Results can be interpreted as indicating that the following factors impact food-inflation pass-through in SIDS:
- market structures
- dependence on imports
- the health of supply chains
Policy implications and recommendations
- Priority areas for policymakers in SIDS should include:
- addressing market structures that amplify external food price shocks
- reducing vulnerability from heavy dependence on imports
- strengthening supply-chain resilience to limit food-inflation pass-through
Laron Alleyne and Patrick Blagrave, "Global Commodity Inflation Pass-through: Vulnerability of Small Island Developing States", IMF Working Paper No. 2025/138, July 4, 2025.
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