TY  - JOUR
AU  - Gouel, Christophe
TI  - Food Price Volatility and Domestic Stabilization Policies in Developing Countries
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 18934
PY  - 2013
Y2  - April 2013
DO  - 10.3386/w18934
UR  - http://www.nber.org/papers/w18934
L1  - http://www.nber.org/papers/w18934.pdf
N1  - Author contact info:
Christophe Gouel
INRAE, Economie Publique
AgroParisTech
16 rue Claude Bernard
75005 Paris
christophe.gouel@inrae.fr
France
E-Mail: christophe.gouel@inrae.fr
M1  - published as Christophe Gouel. "Food Price Volatility and Domestic Stabilization Policies in Developing Countries," in Jean-Paul Chavas, David Hummels, and Brian D. Wright, editors, "The Economics of Food Price Volatility" University of Chicago Press (2014)

M3  - presented at "The Economics of Food Price Volatility Conference", August 15-16, 2012
AB  - When food prices spike in countries with large numbers of poor people, hunger and malnutrition are very likely to result in the absence of public intervention. For governments, this is also a case of political survival. Government actions often take the form of direct interventions in the market to stabilize food prices, which goes against most international advice to rely on safety nets and world trade. Despite the limitations of food price stabilization policies, they are widespread in developing countries. This paper attempts to untangle the elements of this policy conundrum. Price stabilization policies arise as a result of international and domestic coordination problems. At the individual country level, it is in the national interest of many countries to adjust trade policies to take advantage of the world market in order to achieve domestic price stability. When countercyclical trade policies become widespread, the result is a thinner and less reliable world market, which further decreases the appeal of laissez-faire. A similar vicious circle operates in the domestic market: without effective policies to protect the poor, such as safety nets, food market liberalization lacks credibility and makes private actors reluctant to intervene, which in turn forces government to step in. The current policy challenge lies in designing policies that will build trust in world markets and increase trust between public and private agents.
ER  -