EconPapers    
Economics at your fingertips  
 

Food prices and inflation targeting in emerging economies

Marc Pourroy (), Benjamin Carton () and Dramane Coulibaly ()

International Economics, 2016, vol. 146, issue C, 108-140

Abstract: The two episodes of food price surges in 2007 and 2011 followed by a drop in 2014 have been particularly challenging for developing and emerging economies’ central banks and have raised the question of how monetary authorities should react to such external relative price shocks. We investigate the optimal monetary policy that manages food price shocks. To this end, we develop a new-Keynesian small open-economy model that incorporates world food price shocks. We show that the optimal monetary policy depends on country income level. In low and medium income countries, overall consumer price targeting is optimal, while in high-income countries non-food inflation targeting is the best option. This result holds not only because food represents a significant share in total consumption in low and medium income countries, but also because of food good composition. Indeed, the poorer the country, the higher the share of purely domestic food in consumption and the more detrimental lack of attention to the evolution in food prices.

Keywords: Monetary policy; Commodities; Food prices; DSGE models (search for similar items in EconPapers)
JEL-codes: E32 E52 O23 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S2110701715000815
Full text for ScienceDirect subscribers only

Related works:
Journal Article: Food Prices and Inflation Targeting in Emerging Economies (2016) Downloads
Working Paper: Food prices and inflation targeting in emerging economies (2016)
Working Paper: Food Prices and Inflation Targeting in Emerging Economies (2013) Downloads
Working Paper: Food Prices and Inflation Targeting in Emerging Economies (2012) Downloads
Working Paper: Food Prices and Inflation Targeting in Emerging Economies (2012) Downloads
Working Paper: Food Prices and Inflation Targeting in Emerging Economies (2012) Downloads
Working Paper: Food Prices and Inflation Targeting in Emerging Economies (2012) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:inteco:v:146:y:2016:i:c:p:108-140

DOI: 10.1016/j.inteco.2015.12.001

Access Statistics for this article

International Economics is currently edited by Valerie Mignon and Marcelo Olarreaga

More articles in International Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

 
Page updated 2022-10-01
Handle: RePEc:eee:inteco:v:146:y:2016:i:c:p:108-140