Transport Frictions and the Pass-Through of Global Price Shocks in a Spatial Model of Low-Income Countries

Lisa Martin, Christopher Adam and Douglas Gollin ()

No 2025/039, IMF Working Papers from International Monetary Fund

Abstract: We develop a spatial dynamic general equilibrium model of a small open agricultural economy to study the impact of global food, fuel and fertilizer price shocks on consumption patterns of heterogeneous households located in different regions, under alternative fiscal responses, including direct price subsidies and household transfers. We show strong spatial heterogeneity in response to shocks, with associated implications for welfare. In particular, while urban households’ consumption baskets are more exposed to the direct effects of global food price shocks, remote rural households’ production and consumption are more exposed to supply-side dislocations associated with shocks to fuel and fertilizer prices.

Keywords: Spatial General Equilibrium; Import Price Shocks; Household Heterogeneity; Food Security; Fiscal Policy; fertilizer price shock; import price shock; No. 25/39; price shock; transport cost; Consumption; Agroindustries; Imports; Food prices; Global; Sub-Saharan Africa (search for similar items in EconPapers)
Pages: 61
Date: 2025-02-14
New Economics Papers: this item is included in nep-agr, nep-dge and nep-int
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