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Simulation Model for Estimating the Poverty Impact of Changes in Food and Fuel Prices

Price Shocks Toolkit

In 2008 the world was hit by record high food and oil prices. Beyond the destabilizing effect on the global and national economies, this created severe hardships for millions of poor people in developing countries. Although world food and fuel prices have subsided from their peaks, they remain substantially above the levels seen as recently as five years ago, and are expected to remain volatile over the next few years. To formulate effective policy measures to mitigate the adverse impacts on poor people, Bank staff and client governments require timely estimates of the likely impacts of the price shocks and response policies.

This tool is designed to be easy-to-use, with modest data requirements. It estimates the impact of price changes and/or policy responses. Analysts select various scenarios with respect to commodity prices, food and fuel subsidies, and safety net programs such as cash transfers. The model then simulates the corresponding outcomes for such variables as the poverty headcount and poverty gap indices, as well as outlays on subsidies and transfers, GDP growth, and CPI inflation.

Users may choose between an Excel version of the model and a Stata-based version. The toolkit comprises a User's Guide, Technical Appendix, Excel workbook, and a Stata do file. Sample data are included in the Excel workbook, and in a separate Stata data file.