Food storage, multiple equilibria and instability: Why stable markets may become unstable during food crises

John Mackinnon

No 1999-01, CSAE Working Paper Series from Centre for the Study of African Economies, University of Oxford

Abstract: A temporary-equilibrium model replicating institutional features of low-income agricultural economies is developed. In this model, food is held as an asset; because food production is relatively volatile, those with negative temporary income are net buyers of food. When food is the only asset, asset effects are likely to reduce the price-elasticity of the demand for food and can make it tatonnement-unstable, because the distributional effects of food price rises increase savings. When money is introduced, instability remains possible because a permanent rise in the price level increases risk, inducing substitution from money into food stocks.

JEL-codes: D51 Q11 Q12 (search for similar items in EconPapers)
Date: 1999
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Persistent link: https://EconPapers.repec.org/RePEc:csa:wpaper:1999-01

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