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Food storage, multiple equilibria and instability: Why stable markets may become unstable during food crises

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  • John Mackinnon

Abstract

A temporary-equilibrium model replicating institutional features of low-income agricultural economies is developed. In this model, food is held as an asset; because food production is relatively volatile, those with negative temporary income are net buyers of food. When food is the only asset, asset effects are likely to reduce the price-elasticity of the demand for food and can make it tatonnement-unstable, because the distributional effects of food price rises increase savings. When money is introduced, instability remains possible because a permanent rise in the price level increases risk, inducing substitution from money into food stocks.

Suggested Citation

  • John Mackinnon, 1999. "Food storage, multiple equilibria and instability: Why stable markets may become unstable during food crises," CSAE Working Paper Series 1999-01, Centre for the Study of African Economies, University of Oxford.
    • Handle: RePEc:csa:wpaper:1999-01
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    File URL: https://ora.ox.ac.uk/objects/uuid:28453a55-655e-4289-9e58-3335a3e773e2
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    JEL classification:

    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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