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Comparing the impact of food and energy price shocks on consumers : a social accounting matrix analysis for Ghana

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  • Parra, Juan Carlos
  • Wodon, Quentin

Abstract

Many countries have been affected by food and oil price shocks. Rising energy costs have manifested themselves through higher prices of gas at the pump and through price increases for many other goods such as kerosene and transport. But in some countries there has also been some degree of protection for consumers for example when authorities have chosen to try to keep electricity tariffs affordable through implicit subsidies (which are unfortunately often poorly targeted). For food prices, the effect on consumers has often been more rapid than for oil-related products, as the increase in import prices have been typically fully passed on to consumers and has often been accompanied by increases in the prices of domestically produced foods. Recent attention has therefore rightly been focused on food prices, but the issue of oil prices is important as well. While food prices tend to have a larger direct impact on consumers due to the larger share of food in total household consumption, oil prices may have larger multiplier effects than food prices because oil-related products are used as intermediary products in many productive sectors. It therefore remains an open question as to whether the medium-term impact of food or oil prices is likely to be larger in any given country. It also remains open to question as to whether urban as opposed to rural households are most likely to be affected. While urban households are likely to rely on consumption of imported goods more than rural households, the weight of food and possibly oil-related products may well be larger in the consumption patterns of rural than urban households. Answering these questions may be useful to guide discussions on compensatory measures that governments can take to respond to the twin crisis of higher food and oil prices. In this context the objective of this paper is to provide a comparative analysis of the multiplier impact of both types of price shocks using a recent Social Accounting Matrix for Ghana. The paper finds that both the direct impacts of food prices and the indirect impacts of oil prices are potentially large, so that both should be dealt with by authorities when considering compensatory measures to protect households from higher consumer prices.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4741.

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Date of creation: 01 Oct 2008
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Handle: RePEc:wbk:wbrwps:4741

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Keywords: Markets and Market Access; Food&Beverage Industry; Energy Production and Transportation; Emerging Markets; Access to Markets;

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References

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  1. Quentin Wodon & Hassan Zaman, 2010. "Higher Food Prices in Sub-Saharan Africa: Poverty Impact and Policy Responses," World Bank Research Observer, World Bank Group, World Bank Group, vol. 25(1), pages 157-176, February.
  2. Thorbecke, Erik & Jung, Hong-Sang, 1996. "A multiplier decomposition method to analyze poverty alleviation," Journal of Development Economics, Elsevier, Elsevier, vol. 48(2), pages 279-300, March.
  3. Arndt, Channing & Jensen, Henning Tarp & Tarp, Finn, 2000. "Structural Characteristics of the Economy of Mozambique: A SAM-Based Analysis," Review of Development Economics, Wiley Blackwell, Wiley Blackwell, vol. 4(3), pages 292-306, October.
  4. Defourny, Jacques & Thorbecke, Erik, 1984. "Structural Path Analysis and Multiplier Decomposition within a Social Accounting Matrix Framework," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 94(373), pages 111-36, March.
  5. Pyatt, F Graham & Round, Jeffery I, 1979. "Accounting and Fixed Price Multipliers in a Social Accounting Matrix Framework," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 89(356), pages 850-73, December.
  6. Seale, James L., Jr. & Regmi, Anita & Bernstein, Jason, 2003. "International Evidence On Food Consumption Patterns," Technical Bulletins, United States Department of Agriculture, Economic Research Service 33580, United States Department of Agriculture, Economic Research Service.
  7. Ivanic, Maros & Martin, Will, 2008. "Implications of higher global food prices for poverty in low-income countries," Policy Research Working Paper Series 4594, The World Bank.
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Citations

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Cited by:
  1. Wodon, Quentin & Zaman, Hassan, 2008. "Rising food prices in Sub-Saharan Africa : poverty impact and policy responses," Policy Research Working Paper Series 4738, The World Bank.
  2. repec:wbk:wbpubs:13082 is not listed on IDEAS
  3. Akkemik, K. Ali, 2011. "Potential impacts of electricity price changes on price formation in the economy: a social accounting matrix price modeling analysis for Turkey," Energy Policy, Elsevier, Elsevier, vol. 39(2), pages 854-864, February.
  4. Quentin Wodon, 2012. "Improving the Targeting of Social Programs in Ghana," World Bank Publications, The World Bank, number 13081, August.

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