Optimal food price stabilisation policy
AbstractThis paper proposes a framework for designing optimal food price stabilisation policies in a self-sufficient developing country. It uses a rational expectations storage model with risk-averse consumers and incomplete markets. Government stabilises food prices by carrying public stock and by applying a state-contingent subsidy/tax to production. The policy rules are designed to maximise intertemporal welfare. The optimal policy under commitment crowds out all private stockholding activity by removing the profit opportunity from speculation. The countercyclical subsidy/tax to production helps price stabilisation by subsidising production in periods of scarcity and by taxing it in periods of glut. It contributes little to welfare gains, most of which come from stabilisation achieved through public storage.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Elsevier in its journal European Economic Review.
Volume (Year): 57 (2013)
Issue (Month): C ()
Contact details of provider:
Web page: http://www.elsevier.com/locate/eer
Food price stabilisation; Incomplete markets; Risk-aversion; Storage;
Find related papers by JEL classification:
- D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
- Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
- Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Christophe Gouel & Sébastien Jean, 2012.
"Optimal Food Price Stabilization in a Small Open Developing Country,"
2012-01, CEPII research center.
- Gouel, Christophe & Jean, Sebastien, 2012. "Optimal food price stabilization in a small open developing country," Policy Research Working Paper Series 5943, The World Bank.
- Ikram Jebabli & Mohamed Arouri & Frédéric Teulon, 2014. "On the effects of world stock market and oil price shocks on food prices: An empirical investigation based on TVPVAR models with stochastic volatility," Working Papers 2014-209, Department of Research, Ipag Business School.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If references are entirely missing, you can add them using this form.