Maintaining a stable price environment is one of the primary objectives of the Public Foodgrains Distribution System (PFDS) in Bangladesh. Proponents of traditional welfare economics often conclude that schemes to stabilize commodity prices are economically wasteful. Nevertheless, many developing economies use some type of stabilization policy to contain the instability of prices arising from shocks to the domestic supply of foodgrains. In Bangladesh, for one, management of foodgrain prices has far-reaching implications for both short-run food security and long-run economic development (Ahmed 1988). Policymakers in such economies will continue to use stabilization policies to counteract the variability of prices, particularly of primary staple foods.
This report presents the outcome of work to develop a disaggregated model for rice price stabilization in Bangladesh.