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Title Implications of food subsistence for monetary policy and inflation / prepared by Rafael Portillo, Luis-Felipe Zanna, Stephen O'Connell, and Richard Peck
Published [Washington, D.C.] : International Monetary Fund, [2016]
©2016

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Description 1 online resource (62 pages) : color illustrations
Series IMF working paper, 1018-5941 ; WP/16/70
IMF working paper ; WP/16/70.
Summary We introduce subsistence requirements in food consumption into a simple new-Keynesian model with flexible food and sticky non-food prices. We study how the endogenous structural transformation that results from subsistence affects the dynamics of the economy, the design of monetary policy, and the properties of inflation at different levels of development. A calibrated version of the model encompasses both rich and poor countries and broadly replicates the properties of inflation across the development spectrum, including the dominant role played by changes in the relative price of food in poor countries. We derive a welfare-based loss function for the monetary authority and show that optimal policy calls for complete (in some cases nearcomplete) stabilization of sticky-price non-food inflation, despite the presence of a foodsubsistence threshold. Subsistence amplifies the welfare losses of policy mistakes, however, raising the stakes for monetary policy at earlier stages of development.--Abstract
Notes "March 2016."
At head of title: "Research Department."
Bibliography Includes bibliographical references (pages 56-61)
Notes Online resource; title from pdf title page (IMF.org Web site, viewed March 21, 2016)
Subject Consumption (Economics) -- Developing countries -- Econometric models
Food prices -- Developing countries -- Econometric models
Monetary policy -- Developing countries -- Econometric models
Inflation (Finance) -- Econometric models
Well-being -- Developing countries -- Econometric models
Consumption (Economics) -- Econometric models
Food prices -- Econometric models
Inflation (Finance) -- Econometric models
Monetary policy -- Econometric models
Developing countries
Form Electronic book
Author Portillo, Rafael (Rafael Antonio), author, (IMFstaff)
Zanna, Luis-Felipe, author, (IMFstaff)
O'Connell, Stephen A., author.
Peck, Richard, author
International Monetary Fund. Research Department, issuing body.
ISBN 1475542631
9781475542639
ISSN 1018-5941