Food Prices and Inflation Targeting in Emerging Economies

Marc Pourroy, Benjamin Carton () and Dramane Coulibaly

Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne

Abstract: The two episodes of food price surges in 2007 and 2011 have been particularly challenging for developing and emerging economies' central banks and have raised the question of how monetary authorities should react to such external relative price shocks. We develop a new-keynesian small open-economy model and show that non-food inflation is a good proxy for core inflation in high-income countries, but not for middle-income and low-income countries. Although, in these countries we find that associating non-food inflation and core inflation may be promoting bably-designed policies, and consequently central banks should target headline inflation rather than non-food inflation. This result holds because non-tradable food represents a significant share in total consumption. Indeed, the poorer the country, the higher the share of purely domestic food in consumption and the more detrimental lack of attention to the evolution in food prices

Keywords: Monetary policy; commodities; food prices; DSGE models (search for similar items in EconPapers)
JEL-codes: E32 E52 O23 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2012-12
New Economics Papers: this item is included in nep-agr, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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http://mse.univ-paris1.fr/pub/mse/CES2012/12087.pdf (application/pdf)

Related works:
Journal Article: Food Prices and Inflation Targeting in Emerging Economies (2016)
Journal Article: Food prices and inflation targeting in emerging economies (2016)
Working Paper: Food prices and inflation targeting in emerging economies (2016)
Working Paper: Food Prices and Inflation Targeting in Emerging Economies (2013)
Working Paper: Food Prices and Inflation Targeting in Emerging Economies (2013)
Working Paper: Food Prices and Inflation Targeting in Emerging Economies (2012)
Working Paper: Food Prices and Inflation Targeting in Emerging Economies (2012)
Working Paper: Food Prices and Inflation Targeting in Emerging Economies (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:mse:cesdoc:12087

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