How do governments respond to food price volatility?
A collaborative project between Cornell University, University of Copenhagen, and UNU-WIDER on the political economy of food price policy studied how selected governments responded to increasing food price volatility, and explains why they responded as they did. The degree to which world market price volatility was transmitted to national and local markets varied greatly among the 16 countries included in the project. This was due to trade policies, differences between import and export parity prices, and several other factors. The low degree to which international prices were reflected in domestic prices in some cases, and the large impact of national factors—such as local weather events, poorly functioning domestic markets, and limited dependence on foreign trade—meant that the behavioural response by governments to the international food crisis tended to be similar to the responses to earlier food price fluctuations caused by national factors. On the basis of the findings from the 16 study countries, eight policy recommendations are given, including strengthening the policy-relevant evidence base and making of investments to increase food supply elasticity.