Pumps and Plates: Passthrough of International Fuel and Food Price Shocks to Domestic Markets

Huy Nguyen and Celine Thevenot

No 2026/148, IMF Working Papers from International Monetary Fund

Abstract: Fuel and food constitute significant portions of consumer baskets, yet their prices are highly volatile. The renewed energy price shock in March 2026, driven by geopolitical disruptions and supply constraints, has highlighted the macroeconomic and distributional importance of how international price shocks transmit to domestic markets. Spikes in these prices can have major social, political, and economic implications. The conventional policy approach is to allow domestic retail prices to align with international prices while protecting the most vulnerable. However, many countries intervene in price settings to shield their domestic markets from global fluctuations. This paper provides a comprehensive assessment of the passthrough from global to domestic retail prices for four commodities: gasoline, diesel, wheat, and rice over the past two decades in many countries. We employ a dynamic model of local projections building on the work of Kpodar and Abdallah (2017). Our findings indicate that average passthrough is incomplete, with fuel exhibiting higher and faster passthrough than food. The extent of passthrough varies by period, region, and between commodity exporters and importers. We also examine asymmetric responses to global price shocks and find evidence of a ratchet effect: price increases are more likely to be passed through than decreases.

Keywords: food price; IMF working papers; price shock; fuel price; price Passthrough; Agricultural commodities; Food prices; Fuel prices; Inflation; Commodity prices; Global; Middle East; Asia and Pacific; Sub-Saharan Africa; Africa (search for similar items in EconPapers)
Pages: 43
Date: 2026-07-17
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