Working Paper: CEPR ID: DP10076
Authors: Hans G. Jensen; Kym Anderson
Abstract: When prices spike in international grain markets, national governments often reduce the extent to which that spike affects their domestic food markets. Those actions exacerbate the price spike and international welfare transfer associated with that terms of trade change. Several recent analyses have assessed the extent to which those policies contributed to the 2006-08 international price rise, but only by focusing on one commodity or using a back-of-the envelope (BOTE) method. This paper provides a more-comprehensive analysis using a global economy-wide model that is able to take account of the interactions between markets for farm products that are closely related in production and/or consumption, and able to estimate the impacts of those insulating policies on grain prices and on the grain trade and economic welfare of the world?s various countries. Our results support the conclusion from earlier studies that there is a need for stronger WTO disciplines on export restrictions.
Keywords: commodity price stabilization; distorted incentives; domestic market insulation; international price transmission
JEL Codes: F14; Q17; Q18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| insulating policies (G52) | international grain price spikes (Q11) |
| exogenous shocks (F41) | increased international prices (F49) |
| government responses to exogenous shocks (E65) | domestic prices (P22) |
| government responses to exogenous shocks (E65) | international trade dynamics (F10) |
| trade policy changes (F13) | observed increase in rice prices (Q11) |
| trade policy changes (F13) | observed increase in coarse grains prices (Q11) |
| trade policy changes (F13) | observed increase in wheat prices (Q11) |
| trade interventions (F13) | economic welfare transfers from food-importing countries to food-exporting countries (F10) |