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Food Prices, Government Subsidies and Fiscal Balances in South Mediterranean Countries

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  • Marga Peeters
  • Ronald Albers

Abstract

Soaring food and energy prices sparked the revolts in Northern African countries at the end of 2010. Despite government subsidies, consumer price inflation rose, which reduced consumers’ purchasing power. This article empirically investigates the impact of world food prices on inflation and government subsidies for Algeria, Egypt, Israel, Jordan, Lebanon, Morocco, the occupied Palestinian territories and Tunisia during the ten-year period 2002-2011. Our findings show an asymmetry in the response of consumer price inflation to world food price shocks, in that soaring world food prices made inflation rise fast while nominal rigidities prevented inflation from falling. Moreover, this paper shows that government balances deteriorated up to 2% of GDP in 2008 and 2011 due to the incremental government food subsidies while they hardly improved in value terms when world food prices sharply fell in 2009.
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  • Marga Peeters & Ronald Albers, 2013. "Food Prices, Government Subsidies and Fiscal Balances in South Mediterranean Countries," Development Policy Review, Overseas Development Institute, vol. 31(3), pages 273-290, May.
    • Handle: RePEc:bla:devpol:v:31:y:2013:i:3:p:273-290
    DOI: dpr.12007
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    2. Jeffrey Alwang & Samy Sabry & Kamel Shideed & Atef Swelam & Habib Halila, 2018. "Economic and food security benefits associated with raised-bed wheat production in Egypt," Food Security: The Science, Sociology and Economics of Food Production and Access to Food, Springer;The International Society for Plant Pathology, vol. 10(3), pages 589-601, June.
    3. Jiayi Joey Yu & Christopher S. Tang & Zuo-Jun Max Shen, 2018. "Improving Consumer Welfare and Manufacturer Profit via Government Subsidy Programs: Subsidizing Consumers or Manufacturers?," Manufacturing & Service Operations Management, INFORMS, vol. 20(4), pages 752-766, October.
    4. Jiayi Joey Yu & Christopher S. Tang & ManMohan S. Sodhi & James Knuckles, 2020. "Optimal Subsidies for Development Supply Chains," Manufacturing & Service Operations Management, INFORMS, vol. 22(6), pages 1131-1147, November.

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    More about this item

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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