58 CHAPTER 3


Table 3.1 Number of countries severely affected by food and oil price increases, 2007–08


Number of Type of shocka


Severe negative shocks Oil price shock Food price shock Combined shocks


Positive shocks Oil price shock Food price shock Combined shocks


Less-than-adequate reserves Before the combined shocks After the oil price increase After the food price increase After the combined shocks Total countries


low-income countries severely affected


48 13 42


11 30 23


30 37 27 37 74


Number of


middle-income countries severely affected


33 3


30


23 28 23


18 26 19 25 71


Source: IMF (2008a). aSevere negative shocks are defined as those that induce drops in reserves of more than 0.5 months of imports. Positive shocks are those that result in increased reserves.


other minerals have also benefited from rising commodity prices to some extent (for example, Zambia), as have countries that are net exporters of labor to oil-producing countries (South Asian countries and Philippines; see Rosen and Shapouri 2008). Indeed, the estimates of terms-of-trade trends from the IMF (2009a) show that African economies have done well overall as a result of the commodities boom, so much so that the end of the commodi- ties boom (that is, the 2009 financial crisis) will likely hurt their balance of payments more than the food crisis did. From this perspective it appears that the food crisis was not a macroeconomic crisis in the majority of countries. Of course, the story at the household level is likely to be quite different.


Exchange Rate Movements


As noted in Chapter 2, several currencies have appreciated against the U.S. dollar, the currency in which food and oil exports prices are usually denomi- nated. The distribution of both nominal and real measures are presented in Figure 3.2 for the percentage change in exchange rates from the first quarter of 2002 to the second quarter of 2008, a period that covers the major move- ments of the U.S. dollar as well as the rise in oil and food prices. The distri- bution of nominal movements is centered around a median of a little more than 20 percent, but the distribution is also highly bimodal because of three


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