Domestic policy responses to the food price crisis: The case of Bolivia

Abstract

In face of the global food crisis of 2007–2008, severe concerns arose about how developing countries would be
\naffected by the extreme short-term fluctuations in international commodity prices. We examine the effects of the
\ncrisis on Bolivia, one of the poorest countries of the Americas. We focus on the effectiveness of the domestic policy
\ninterventions in preventing spillovers of the development of international food prices to domestic markets. Using a
\ncointegration model, we study price interdependencies of wheat flour, sunflower oil and poultry. The analysis suggests
\nthat the policy measures taken had little effect on food security during the food crisis. Throughout the entire period,
\nperfect price transmission between the Bolivian poultry and sunflower oil markets and the respective international
\nreference markets existed. Bolivian prices were determined by international prices and the policy interventions in the
\nmarkets of these two commodities were not found to have had an effect. The government’s large-scale wheat flour
\nimports did not shield Bolivian consumers from the shocks of international prices.