Food Prices and the Multiplier Effect of Trade Policy

Food Prices and the Multiplier Effect of Trade Policy

IMF, 2014

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The merit of government intervention in free markets is a hotly contended issue. When it comes to food prices, however, governments’ active trade policies seem to exacerbate existing problems. Economists Paolo Giordani, Nadia Rocha and Michele Ruta parse data on food price volatility between 2008 and 2011 that appear to support a positive correlation between policies designed to correct imbalances and higher food prices. Rich in formulaic expression, this scholarly analysis considers how, rather than preventing “food crises,” government can actually contribute to them. getAbstract recommends this report’s erudite insights to economists and policy makers.


Global food prices are at the mercy of numerous influential factors, including declining food supplies, rising market demand in the developing world, changing monetary policy in developed countries and ongoing speculation. However, economists have long suspected that government trade policies also play a role in “food crises,” which are “sudden and rapid spikes in food prices.” To address price shocks, governments often implement various trade measures that, on the surface, seem to protect consumers and producers, but that have, in fact, the opposite effects of squeezing...

About the Authors

Paolo Giordani is an economics professor at LUISS Guido Carli University in Rome. Nadia Rocha is a senior economic adviser to Colombia’s Ministry of Trade. Michele Ruta is a lead economist at the World Bank.

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