Are Foreign Aid and Remittances a Hedge against Food Price Shocks in Developing Countries?

Abstract : This paper measures the effects of food price shocks on both the level of household consumption per capita and the instability of the household consumption per capita growth rate in developing countries. In this vein, the paper explores specifically the role of aid and remittance inflows in the mitigation of the effects of food price shocks in the recipient economies. Using a large sample of developing countries observed over the period 1980 - 2009 and mobilizing dynamic panel data specifications, the econometric results yield three important findings. First, food price shocks significantly affect both the level and the instability of household consumption in the highly vulnerable countries. Second, remittance and aid inflows significantly dampen the effect of food price shocks in the most vulnerable countries. Third, a lower remittance-to-GDP ratio is required to fully absorb the effects of the food price shocks compared to the corresponding aid-to-GDP ratio.
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Submitted on : Tuesday, July 12, 2011 - 11:48:18 AM
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Jean-Louis Combes, Christian Hubert Ebeke, Mireille S. Ntsama Etoundi, Thierry Yogo. Are Foreign Aid and Remittances a Hedge against Food Price Shocks in Developing Countries?. 2011. ⟨halshs-00608128v1⟩

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