Trade policy announcements can increase price volatility in global food commodity markets.

Many countries use trade policy to insulate their domestic markets from price volatility. However, there is a widespread concern that such policies-particularly export restrictions-may amplify global price volatility, adversely affecting other countries. Here, using an original dataset on trade policy announcements on wheat and maize encompassing the food price crises of 2007-2008 and 2010-2011, we show that the announcement of trade policy changes can increase global price volatility. This effect applies not only to export restrictions but also to import liberalization measures and is most pronounced when markets are tight (stocks are low). Policymakers should work towards increasing stock levels to mitigate price volatility effects of trade policy changes. When markets are tight, export restrictions and import liberalizations should be avoided.