Are Foreign Aid and Remittance Inflows a Hedge Against Food Price Shocks?

International Monetary Fund

No 2012/067, IMF Working Papers from International Monetary Fund

Abstract: This paper explores the role of foreign aid and remittance inflows in the mitigation of the effects of food price shocks. Using a large sample of developing countries and mobilising dynamic panel data specifications, the econometric results yield two important findings. First, remittance and aid inflows significantly dampen the effect of food price shocks in the most vulnerable countries. Second, a lower remittance-to-GDP ratio is required in order to fully absorb the effects of food price shocks compared to the corresponding aid-to-GDP ratio.

Keywords: WP; food price shock; foreign aid; Household consumption; food price shocks; vulnerability; aid; remittances; remittance inflow; growth rate; official development assistance; consumption volatility model; outcome variable; Commodity price shocks; Food prices; Consumption; Sub-Saharan Africa (search for similar items in EconPapers)
Pages: 28
Date: 2012-03-01
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Citations: View citations in EconPapers (1)

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