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A Decade of Impact of Monetary Policy on Food Inflation: An Overview and Future Direction

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  • Simranjeet Kaur

Abstract

This article presents a systematic literature review spanning the decade of 2010–2020 in a thematic fashion. It provides an in-depth analysis of how monetary policy regimes are responding to food inflation. It discusses about factors driving food inflation and the manner in which efficiency of financial markets facilitate policy transmission. Further, it explains how food insecurity is exacerbated by rise in food prices and the way high-income countries protect their farmers through input subsidies, indirectly contributing to global food price hike. It also argues that a strong monetary policy credibility can lend stationarity and mean-reversion to inflation rates. Next, it discusses the issues faced by central banks in measurement of inflation such as conflict of choice in different inflation measures and supply side constraints ranging from high farm-to-fork mark-ups to cartelization and hoarding. In subsequent section, it deals with the question whether to target headline or core inflation. After that, it presents a snapshot of various advanced and emerging countries operating their monetary policy in the presence of fiscal policy. It illustrates that the degree of fiscal intervention should be decided according to individual threshold of every country, taking into account the proportion of Ricardian and non-Ricardian population.

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  • Simranjeet Kaur, 2023. "A Decade of Impact of Monetary Policy on Food Inflation: An Overview and Future Direction," Vision, , vol. 27(4), pages 498-509, August.
    • Handle: RePEc:sae:vision:v:27:y:2023:i:4:p:498-509
    DOI: 10.1177/09722629211015603
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    References listed on IDEAS

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