IMF Working Papers

Transport Frictions and the Pass-Through of Global Price Shocks in a Spatial Model of Low-Income Countries

By Lisa Martin, Christopher S Adam, Douglas Gollin

February 14, 2025

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Format: Chicago

Lisa Martin, Christopher S Adam, and Douglas Gollin. "Transport Frictions and the Pass-Through of Global Price Shocks in a Spatial Model of Low-Income Countries", IMF Working Papers 2025, 039 (2025), accessed March 27, 2025, https://doi.org/10.5089/9798400298738.001

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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

We develop a spatial dynamic general equilibrium model of a small open agricultural economy to study the impact of global food, fuel and fertilizer price shocks on consumption patterns of heterogeneous households located in different regions, under alternative fiscal responses, including direct price subsidies and household transfers. We show strong spatial heterogeneity in response to shocks, with associated implications for welfare. In particular, while urban households’ consumption baskets are more exposed to the direct effects of global food price shocks, remote rural households’ production and consumption are more exposed to supply-side dislocations associated with shocks to fuel and fertilizer prices.

Subject: Agroindustries, Consumption, Economic sectors, Food prices, Imports, International trade, National accounts, Prices

Keywords: Agroindustries, Consumption, Fertilizer price shock, Fiscal Policy, Food prices, Food Security, Global, Household Heterogeneity, Import price shock, Import Price Shocks, Imports, No. 25/39, Price shock, Spatial General Equilibrium, Sub-Saharan Africa, Transport cost

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