 Implications of domestic price insulation for global food price behaviorJournal of International Money and Finance, 2014, vol. 42, issue C, 272-288 Abstract: Rapid changes in global food prices in recent years are widely viewed as a serious threat to global development. While various sources of price instability in agriculture have been identified, little attention appears to have been given to the importance of changes in trade policies that insulate domestic prices from world markets as a source of volatility in world prices. A contribution of this paper is to show that these interventions are dynamically more complex than simple proportional insulation. Insulation against an initial price increase in world prices increases the magnitude of that increase, while subsequent adjustments to the level of protection change the fundamental nature of price volatility. We find such policies are widespread and increase the volatility of world prices while not reducing the volatility of domestic prices because of the collective action problem involved in this form of policy intervention. Keywords: Price volatility; Insulation; Trade policy; Protection; Storage model (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:42:y:2014:i:c:p:272-288 DOI: 10.1016/j.jimonfin.2013.08.015 Access Statistics for this article Journal of International Money and Finance is currently edited by J. R. Lothian More articles in Journal of International Money and Finance from Elsevier |
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