Many countries use trade policy to stabilize domestic food prices, but this can increase global price volatility. Using data on wheat and maize trade policy announcements from 2005-2017, the authors show that announcements of trade policy changes (including export restrictions and import liberalizations) increase global price volatility, especially when markets are tight (low stock levels). Policymakers should aim to increase stock levels and avoid export restrictions and import liberalizations when markets are tight.

Michael Brander, Thomas Bernauer, Matthias Huss