Food Price Volatility and Domestic Stabilization Policies in Developing Countries
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World Bank, Washington, DC
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When food prices spike in countries with
large numbers of poor people, public intervention is
essential to alleviate hunger and malnutrition. For
governments, this is also a case of political survival.
Government actions often take the form of direct
interventions in the market to stabilize food prices, which
goes against most international advice to rely on safety
nets and world trade. Despite the limitations of food price
stabilization policies, they are widespread in developing
countries. This paper attempts to untangle the elements of
this policy conundrum. Price stabilization policies arise as
a result of international and domestic coordination
problems. At the individual country level, it is in the
national interest of many countries to adjust trade policies
to take ad-vantage of the world market in order to achieve
domestic price stability. When countercyclical trade
policies become widespread, the result is a thinner and less
reliable world market, which further decreases the appeal of
laissez-faire. A similar vicious circle operates in the
domestic market: without effective policies to protect the
poor, such as safety nets, food market liberalization lacks
credibility and makes private actors reluctant to intervene,
which in turn forces government to step in. The current
policy challenge lies in designing policies that will build
trust in world markets and increase trust between pub-lic
and private agents.
Palabras clave
AGRICULTURAL PRICES, AGRICULTURE, ARBITRAGE, BENCHMARK, BORDER PRICE, BORROWING, CAPITAL ACCUMULATION, CEREAL PRICES, CHILD LABOR, CLOSED ECONOMIES, CLOSED ECONOMY, COLLECTIVE ACTION, COMMODITIES, COMMODITY, COMMODITY PRICE, COMPARATIVE ADVANTAGE, COMPETITIVE MARKETS, CONSUMERS, CONSUMPTION LEVELS, CRISES, DEBT, DEBTS, DEMAND CURVE, DEMAND FUNCTION, DEVELOPING COUNTRIES, DEVELOPMENT ECONOMICS, DEVELOPMENT POLICY, DIRECT MARKET, DOMESTIC MARKET, DOMESTIC PRICE, DOMESTIC PRICES, ECONOMIC EFFICIENCY, ECONOMIC GROWTH, ECONOMICS RESEARCH, ELASTICITY, EXCESS DEMAND, EXCESS SUPPLY, EXPECTED UTILITY, EXPECTED VALUES, EXPENDITURE, EXPORTS, EXTERNALITIES, FINANCIAL ASSETS, FLOOR PRICE, FLOOR PRICES, FOOD PRICE, FOOD PRICES, FOREIGN CURRENCY, FORMAL ANALYSIS, FREE MARKET, FREE TRADE, FUTURES, GLOBAL MARKET, GOVERNMENT ACTIONS, HUMAN CAPITAL, INCOME, INCOME EFFECTS, INCOMES, INCOMPLETE MARKETS, INELASTIC DEMAND, INSURANCE, INTANGIBLE, INTERNATIONAL TRADE, ITC, LIQUIDITY, LOW-INCOME COUNTRIES, MACROECONOMICS, MARGINAL BENEFITS, MARGINAL COST, MARGINAL UTILITY, MARKET BEHAVIOR, MARKET CONTROL, MARKET EQUILIBRIUM, MARKET FAILURE, MARKET FAILURES, MARKET INTEGRATION, MARKET LIBERALIZATION, MARKET PRICE, MARKET STABILIZATION, MARKET TRANSPARENCY, MARKET VALUE, MARKETING, MOTIVATION, MULTILATERAL TRADE, NATIONAL INCOME, NATURAL DISASTERS, OPEN ECONOMIES, OPEN ECONOMY, OPPORTUNITY COST, OPPORTUNITY COSTS, PECUNIARY EXTERNALITIES, PER CAPITA INCOME, POLITICAL ECONOMY, POLITICAL UNREST, PORTFOLIO, PRICE BAND, PRICE BANDS, PRICE CEILING, PRICE CHANGE, PRICE CHANGES, PRICE FLUCTUATIONS, PRICE INCREASE, PRICE INCREASES, PRICE INDEX, PRICE INSTABILITY, PRICE LEVEL, PRICE MOVEMENTS, PRICE POLICY, PRICE RISK, PRICE RISKS, PRICE STABILITY, PRICE STABILIZATION, PRICE SUBSIDIES, PRICE TRENDS, PRICE UNCERTAINTY, PRICE VARIATIONS, PRICE VOLATILITY, PRIVATE MARKETS, PRODUCTION COSTS, PRODUCTIVITY, PRODUCTIVITY GROWTH, PUBLIC POLICY, PURCHASING, PURCHASING POWER, REDISTRIBUTIVE EFFECTS, RISK AVERSE, RISK AVERSION, RISK EXPOSURE, RISK MANAGEMENT, RISK MARKETS, RISK SHARING, SAFETY, SAFETY NET, SAFETY NETS, SALE, SALES, SAVINGS, SECURITY CONCERNS, SELLING PRICE, SELLING PRICES, SHARE OF STOCKS, SOCIAL PROTECTION, SPREAD, STABILIZATION POLICIES, STABILIZATION POLICY, STOCK MANAGEMENT, STOCK MARKET, STOCKS, SURPLUS, SURPLUSES, TAX, TRADE POLICIES, TRADE POLICY, TRADES, TRANSACTION COSTS, URUGUAY ROUND, VALUATION, WAGE RATES, WORLD MARKET, WORLD MARKETS, WORLD TRADE, WORLD TRADE ORGANIZATION, WTO