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Import Diversification and Rice Market Stability

Author

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  • Desiraju, Naga Lavanya
  • Dalheimer, Bernhard
  • Pede, Valerien

Abstract

Understanding how countries can insure themselves against global macroeconomic and geopolitical shocks is an important topic in international trade and open-economy macroeconomics. This paper examines whether diversification of import sources mitigates the domestic transmission of global supply and demand shocks. We combine monthly trade and price data for 25 major importing countries (2009–2024) from the World Bank, FAO, IMF, and UN Comtrade to construct a panel of domestic retail prices and import diversification indices. We construct a structural VAR and identify global demand and supply shocks using an Independent Component Analysis (ICA) approach based on distance covariance. Dynamic pass-through into domestic prices is then estimated using local projections, allowing us to quantify how exposure varies with import structure. Countries with low import diversification experience substantially larger price increases following demand shocks, whereas highly diversified countries exhibit smaller responses. Positive supply shocks translate into larger price declines in highly diversified countries, indicating that diversified import structures help transmit favorable global supply conditions into domestic markets.

Suggested Citation

  • Desiraju, Naga Lavanya & Dalheimer, Bernhard & Pede, Valerien, 2026. "Import Diversification and Rice Market Stability," 2026 Annual Meeting, July 26 - 28, 2026, Kansas City, Missouri 404677, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea26:404677
    DOI: 10.22004/ag.econ.404677
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    References listed on IDEAS

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