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Are Foreign Aid and Remittances a Hedge against Food Price Shocks in Developing Countries?

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Author Info

  • Jean-Louis Combes

    (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I)

  • Christian Ebeke

    (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I)

  • Mireille Ntsama Etoundi

    (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I)

  • Thierry Yogo

    (Université de Yaoundé II - Université de Yaoundé II)

Abstract

This paper measures the effects of food price shocks on both the level of household consumption per capita and the instability of the household consumption per capita growth rate in developing countries. In this vein, the paper explores the role of aid and remittance inflows in the mitigation of the effects of food price shocks in the recipient economies. Using a large sample of developing countries observed over the period 1980-2009 and mobilising dynamic panel data specifications, the econometric results yield three important findings. First, food price shocks significantly affect both the level and the instability of household consumption in highly vulnerable countries. Second, remittance and aid inflows significantly dampen the effect of food price shocks in the most vulnerable countries. Third, a lower remittance-to-GDP ratio is required in order to fully absorb the effects of food price shocks compared to the corresponding aid-to-GDP ratio.

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Bibliographic Info

Paper provided by HAL in its series Working Papers with number halshs-00608128.

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Date of creation: 04 Jan 2012
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Handle: RePEc:hal:wpaper:halshs-00608128

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Related research

Keywords: Household consumption; food price shocks; vulnerability; Aid; Remittances;

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References

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  1. Bernadette Dia Kamgnia, 2011. "Political Economy of Recent Global Food Price Shocks: Gainers, Losers and Compensatory Mechanism-super- †," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 20(suppl_1), pages -i210, May.
  2. R Blundell & Steven Bond, . "Initial conditions and moment restrictions in dynamic panel data model," Economics Papers W14&104., Economics Group, Nuffield College, University of Oxford.
  3. Jan Dehn, 2000. "Commodity price uncertainty and shocks: implications for economic growth," CSAE Working Paper Series 2000-10, Centre for the Study of African Economies, University of Oxford.
  4. Burke, Paul J. & Leigh, Andrew, 2010. "Do Output Contractions Trigger Democratic Change?," IZA Discussion Papers 4808, Institute for the Study of Labor (IZA).
  5. Combes, Jean-Louis & Ebeke, Christian, 2011. "Remittances and Household Consumption Instability in Developing Countries," World Development, Elsevier, vol. 39(7), pages 1076-1089, July.
  6. Dean Yang, 2006. "Coping with Disaster: The Impact of Hurricanes on International Financial Flows, 1970-2002," NBER Working Papers 12794, National Bureau of Economic Research, Inc.
  7. David Roodman, 2009. "A Note on the Theme of Too Many Instruments," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 71(1), pages 135-158, 02.
  8. Dalia Hakura & Ralph Chami & Peter Montiel, 2009. "Remittances: An Automatic Output Stabilizer?," IMF Working Papers 09/91, International Monetary Fund.
  9. Antonio David, 2010. "How Do International Financial Flows to Developing Countries Respond to Natural Disasters?," IMF Working Papers 10/166, International Monetary Fund.
  10. Era Dabla-Norris & Camelia Minoiu & Luis-Felipe Zanna, 2010. "Business Cycle Fluctuations, Large Shocks, and Development Aid: New Evidence," IMF Working Papers 10/240, International Monetary Fund.
  11. Roland Craigwell & Mahalia Jackman & Winston Moore, 2010. "Economic volatility and remittances," International Journal of Development Issues, Emerald Group Publishing, vol. 9(1), pages 25-42, April.
  12. Ilene Grabel, 2009. "Remittances: Political Economy and Developmental Implications," International Journal of Political Economy, M.E. Sharpe, Inc., vol. 38(4), pages 86-106, December.
  13. Sanket Mohapatra & George Joseph & Dilip Ratha, 2012. "Remittances and natural disasters: ex-post response and contribution to ex-ante preparedness," Environment, Development and Sustainability, Springer, vol. 14(3), pages 365-387, June.
  14. Erik Lueth & Marta Ruiz-Arranz, 2007. "Are workers' remittances a hedge against macroeconomic shocks? The case of Sri Lanka," Asia-Pacific Development Journal, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), vol. 14(1), pages 25-39, June.
  15. Marta Ruiz-Arranz & Erik Lueth, 2007. "Are Workers' Remittances a Hedge Against Macroeconomic Shocks? The Case of Sri Lanka," IMF Working Papers 07/22, International Monetary Fund.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Aid and remittances as hedges against food price shocks
    by Economic Logician in Economic Logic on 2011-08-03 14:21:00
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Cited by:
  1. Giulia Bettin & Andrea Filippo Presbitero & Nikola Spatafora, 2014. "Remittances and vulnerability in developing countries," Mo.Fi.R. Working Papers 93, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  2. Badolo, Felix & Kinda, Somlanare Romuald, 2012. "Climatic shocks and food security in developing countries," MPRA Paper 43006, University Library of Munich, Germany.
  3. Andrea Filippo Presbitero, 2013. "Aid and Vulnerability," Mo.Fi.R. Working Papers 88, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  4. Mthuli Ncube & Zuzana Brixiova, 2013. "Working Paper 188 - Remittances and their Macroeconomic Impact: Evidence from Africa," Working Paper Series 996, African Development Bank.

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  1. Economic Logic blog

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