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

January 15, 2021

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Carine Meyimdjui, and Jean-Louis Combes. Food Price Shocks and Household Consumption in Developing Countries: The Role of Fiscal Policy, (USA: International Monetary Fund, 2021) accessed December 3, 2024

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.

Subject: Commodity price shocks, Exchange rate arrangements, Expenditure, Government consumption, Household consumption

Keywords: Fiscal Policy., Government consumption expenditure, Government expenditure, Government subsidy, Government transfer, Import Food Price Shocks, Price shock, WP

Publication Details

Pages:

25
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2021/012
Stock No:

WPIEA2021012
ISBN:

9781513566887
ISSN:

1018-5941

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