International trade and risk sharing in the global rice market: The impact of foreign and domestic supply shocks

Shikha Jha, Kensuke Kubo, Bharat Ramaswami

Research output: Contribution to journalArticle

Abstract

In the first decade of thismillennium, rising food prices returned as a concern for policy makers, especially in developing economies. This paper examines how supply shocks, both domestic and foreign, impacted imports and consumption in the world rice market between 1960 and 2010. Such an investigation is important in assessing the role of trade in compensating for domestic shocks. If shortages lead economies to impose trade restrictions, then trade may not be allowed to play an important role in stabilizing consumption. The existing literature has highlighted the importance of these policy shocks in the world rice market and how they have worked to increase the volatility of prices and trade flows. Although trade cannot be expected to play a strong role when the major producing and consuming economies are simultaneously hit by negative yield shocks, such a scenario has occurred in only about 3% of all observed cases. We also find that consumption fails to stabilize even when domestic shocks are negative and foreign shocks are positive; however, imports do peak. Thus, while trade does help in coping with domestic risks, it is unable to achieve full risk sharing. Therefore, no matter the nature of foreign shocks, the principal concern is to stabilize consumptionwhen an economy is hit by negative domestic yield shocks. The frequency of such shocks is about 12% in all observed cases, highlighting the importance of domestic responses. We find that domestic rice stocks have been important in stabilizing consumption. The reliance on domestic policies has, in turn, kept the rice market thin.

Original languageEnglish
Pages (from-to)162-182
Number of pages21
JournalAsian Development Review
Volume33
Issue number1
DOIs
Publication statusPublished - 2016 Mar 1
Externally publishedYes

Fingerprint

international trade
world trade
rice
supply
market
economy
world market
import
trade flow
domestic policy
shortage
coping
scenario
food
consumption
policy
world
price

Keywords

  • Food prices
  • International trade
  • Rice market
  • Risk sharing
  • Supply shocks

ASJC Scopus subject areas

  • Geography, Planning and Development
  • Development

Cite this

International trade and risk sharing in the global rice market : The impact of foreign and domestic supply shocks. / Jha, Shikha; Kubo, Kensuke; Ramaswami, Bharat.

In: Asian Development Review, Vol. 33, No. 1, 01.03.2016, p. 162-182.

Research output: Contribution to journalArticle

@article{5e7137f46a424f00ad2c86bbb8847930,
title = "International trade and risk sharing in the global rice market: The impact of foreign and domestic supply shocks",
abstract = "In the first decade of thismillennium, rising food prices returned as a concern for policy makers, especially in developing economies. This paper examines how supply shocks, both domestic and foreign, impacted imports and consumption in the world rice market between 1960 and 2010. Such an investigation is important in assessing the role of trade in compensating for domestic shocks. If shortages lead economies to impose trade restrictions, then trade may not be allowed to play an important role in stabilizing consumption. The existing literature has highlighted the importance of these policy shocks in the world rice market and how they have worked to increase the volatility of prices and trade flows. Although trade cannot be expected to play a strong role when the major producing and consuming economies are simultaneously hit by negative yield shocks, such a scenario has occurred in only about 3{\%} of all observed cases. We also find that consumption fails to stabilize even when domestic shocks are negative and foreign shocks are positive; however, imports do peak. Thus, while trade does help in coping with domestic risks, it is unable to achieve full risk sharing. Therefore, no matter the nature of foreign shocks, the principal concern is to stabilize consumptionwhen an economy is hit by negative domestic yield shocks. The frequency of such shocks is about 12{\%} in all observed cases, highlighting the importance of domestic responses. We find that domestic rice stocks have been important in stabilizing consumption. The reliance on domestic policies has, in turn, kept the rice market thin.",
keywords = "Food prices, International trade, Rice market, Risk sharing, Supply shocks",
author = "Shikha Jha and Kensuke Kubo and Bharat Ramaswami",
year = "2016",
month = "3",
day = "1",
doi = "10.1162/ADEV_a_00064",
language = "English",
volume = "33",
pages = "162--182",
journal = "Asian Development Review",
issn = "0116-1105",
publisher = "Asian Development Bank",
number = "1",

}

TY - JOUR

T1 - International trade and risk sharing in the global rice market

T2 - The impact of foreign and domestic supply shocks

AU - Jha, Shikha

AU - Kubo, Kensuke

AU - Ramaswami, Bharat

PY - 2016/3/1

Y1 - 2016/3/1

N2 - In the first decade of thismillennium, rising food prices returned as a concern for policy makers, especially in developing economies. This paper examines how supply shocks, both domestic and foreign, impacted imports and consumption in the world rice market between 1960 and 2010. Such an investigation is important in assessing the role of trade in compensating for domestic shocks. If shortages lead economies to impose trade restrictions, then trade may not be allowed to play an important role in stabilizing consumption. The existing literature has highlighted the importance of these policy shocks in the world rice market and how they have worked to increase the volatility of prices and trade flows. Although trade cannot be expected to play a strong role when the major producing and consuming economies are simultaneously hit by negative yield shocks, such a scenario has occurred in only about 3% of all observed cases. We also find that consumption fails to stabilize even when domestic shocks are negative and foreign shocks are positive; however, imports do peak. Thus, while trade does help in coping with domestic risks, it is unable to achieve full risk sharing. Therefore, no matter the nature of foreign shocks, the principal concern is to stabilize consumptionwhen an economy is hit by negative domestic yield shocks. The frequency of such shocks is about 12% in all observed cases, highlighting the importance of domestic responses. We find that domestic rice stocks have been important in stabilizing consumption. The reliance on domestic policies has, in turn, kept the rice market thin.

AB - In the first decade of thismillennium, rising food prices returned as a concern for policy makers, especially in developing economies. This paper examines how supply shocks, both domestic and foreign, impacted imports and consumption in the world rice market between 1960 and 2010. Such an investigation is important in assessing the role of trade in compensating for domestic shocks. If shortages lead economies to impose trade restrictions, then trade may not be allowed to play an important role in stabilizing consumption. The existing literature has highlighted the importance of these policy shocks in the world rice market and how they have worked to increase the volatility of prices and trade flows. Although trade cannot be expected to play a strong role when the major producing and consuming economies are simultaneously hit by negative yield shocks, such a scenario has occurred in only about 3% of all observed cases. We also find that consumption fails to stabilize even when domestic shocks are negative and foreign shocks are positive; however, imports do peak. Thus, while trade does help in coping with domestic risks, it is unable to achieve full risk sharing. Therefore, no matter the nature of foreign shocks, the principal concern is to stabilize consumptionwhen an economy is hit by negative domestic yield shocks. The frequency of such shocks is about 12% in all observed cases, highlighting the importance of domestic responses. We find that domestic rice stocks have been important in stabilizing consumption. The reliance on domestic policies has, in turn, kept the rice market thin.

KW - Food prices

KW - International trade

KW - Rice market

KW - Risk sharing

KW - Supply shocks

UR - http://www.scopus.com/inward/record.url?scp=84962673641&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=84962673641&partnerID=8YFLogxK

U2 - 10.1162/ADEV_a_00064

DO - 10.1162/ADEV_a_00064

M3 - Article

AN - SCOPUS:84962673641

VL - 33

SP - 162

EP - 182

JO - Asian Development Review

JF - Asian Development Review

SN - 0116-1105

IS - 1

ER -