On the First-Round Effects of International Food Price Shocks

In: IMF Working Papers v.Working Paper No. 15/33

Abstract

Cover -- Table of Contents -- I. Introduction -- II. The Model -- A. The Representative Consumer -- B. The Consumption Basket and Prices -- C. The Non-Traded Sector -- D. Monetary Policy: Identifying First-Round Effects -- E. Market Clearing Conditions and Model Closure -- F. Definition of the First-Round Effects Equilibrium and the Steady State -- III. Analytical Solution -- A. The Log-linear Version of the Model -- A.1. The Link between Inflation, Relative Prices and First-Round Effects -- B. Solving for the First-Round Effects -- C. Remarks -- IV. Calibration and a Graphic Representation -- A. Calibration -- B. Graphic Representation -- C. Sensitivity Analysis -- V. Extension: Incomplete Tradability of the Food Basket -- A. Analytical Solution Under Incomplete Food Tradability -- VI. Conclusions -- Tables -- Table 1. Benchmark Calibration -- Figures -- Figure 1. First-Round Effects: Financial Autarky, Complete and Incomplete Markets -- Figure 2. First-Round Effects: Varying the Intra-temporal Elasticity of Substitution -- Figure 3. First-Round Effects: Varying the Portfolio Adjustment Costs Parameter and the Persistence of International Food Prices -- Figure 4. First-Round Effects: Varying the Tradable Food Share -- Appendix -- A. Proofs of Propositions and Corollaries -- A.1. Proof of Proposition 1 -- A.2. Proof of Proposition 2 -- A.3. Proof of Proposition 3 -- A.4. Proof of Corollary 1 -- References.