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CONSEQUENCES OF THE CRISIS 59


currency unions. The euro area and the West African franc zone (which is pegged to the euro) have appreciated against the U.S. dollar by some 80 per- cent during this period. Thus the adverse effects of rising commodity imports for many West African countries should, all else being equal, be limited from a macroeconomic perspective. In contrast, the Central American and Carib- bean area, which consists of currencies largely pegged to the U.S. dollar, and quite a large number of other countries around the world have experienced a stable rate of exchange with the dollar, while a few countries have experi- enced depreciation. Real exchange rate movements are still centered around a positive mean, but the distribution is slightly less bimodal, with only the euro area still standing out as a clear group, as variation in inflation rates across euro countries is quite limited. In either case it is clear that although most countries have appreciated against the dollar, considerable variation remains in terms of countries’ vulnerability to rising dollar-denominated food and oil prices.


Of course, countries do not need to buy food imports in U.S. dollars. A country can buy food imports from other regions or, in principle, convert to euros, for example. One way to judge how much cheaper it would be to import from non–U.S. suppliers of food staples is to examine trends in the USDA commodity-specific, trade-weighted U.S.–dollar exchange rate, which shows movements of the U.S. dollar against U.S. agricultural competitors.


Figure 3.2 Histograms of exchange rate appreciations against the U.S. dollar, Q1 2002–Q2 2008


Nominal appreciation


28 24 20 16 12 8 4 0


a Note: Percentage change Real appreciation


28 24 20 16 12 8 4 0


b Percentage change


Sources: Calculations by the authors using data from IMF (2008b) for Figure 3.2a (covering 124 countries) and from USDA (2008c) for Figure 3.2b (covering 95 countries). Q1 and Q2 are the first and second quarters of the year, respectively.


60 40 20 0 20 40 60 80 100 120 20 10 0 10 20 30 40 50 60 70 80 90


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