Food Prices and Inflation Targeting in Emerging Economies

Marc Pourroy, Benjamin Carton and Dramane Coulibaly ()
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Benjamin Carton: CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique
Dramane Coulibaly: EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

Abstract: The two episodes of food price surges in 2007 and 2011 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 develop a new-Keynesian small open-economy model and show that non-food inflation is a good proxy for core inflation in high-income countries, but not for middle-income and low-income countries. Although, in these countries we find that associating non-food inflation and core inflation may be promoting badly designed policies, and consequently central banks should target headline inflation rather than non-food inflation. This result holds because non-tradable food represents a significant share in total consumption. 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)
Date: 2013
Note: View the original document on HAL open archive server: https://hal.science/hal-04141226
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Related works:
Journal Article: Food Prices and Inflation Targeting in Emerging Economies (2016)
Journal Article: Food prices and inflation targeting in emerging economies (2016)
Working Paper: Food prices and inflation targeting in emerging economies (2016)
Working Paper: Food Prices and Inflation Targeting in Emerging Economies (2013)
Working Paper: Food Prices and Inflation Targeting in Emerging Economies (2013)
Working Paper: Food Prices and Inflation Targeting in Emerging Economies (2012)
Working Paper: Food Prices and Inflation Targeting in Emerging Economies (2012)
Working Paper: Food Prices and Inflation Targeting in Emerging Economies (2012)
Working Paper: Food Prices and Inflation Targeting in Emerging Economies (2012)
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