CONSEQUENCES OF THE CRISIS 69


But FEWSNET data report price changes that appear to be lower than those reported in Appendix Table A.3, although the raw data were not made avail- able for cross-checking.3 However, Abbott (2009) reviews evidence from FAO and WFP researchers that identifies similarly large increases in prices, despite the initial delay in transmission. This delay is not surprising. Our ear- lier appraisals of World Bank (2008a) food and nonfood CPI data for 2007 and early 2008 showed a low degree of food inflation in most African countries (see Headey and Fan 2008). But it would appear that at that stage interna- tional prices had not yet peaked and had not worked their way into African markets. Moreover, the spread of the financial crisis outside of the United States to Europe led to a strengthening U.S. dollar, so that although interna- tional prices were declining in U.S. dollars, they were declining much less in euros. Indeed, in our earlier appraisal we had cautioned against putting too much weight on data from early 2008 for this very reason: exchange rates can reverse quickly. Evidence cited in Abbott (2009), for example, confirms that West African cereal prices, especially in the euro-pegged West African franc zone, remained relatively high in the second half of 2008 and in early 2009. In light of the updated facts, we put forth several factors that could explain why African countries appear to have experienced surprisingly rapid inflation: 1. Greater dependence on cereal imports in large parts of Africa (Ng and Aksoy 2008)


2. Relative to Asia, much weaker policy mechanisms for stabilizing food prices (Dawe 2008)


3. Increasing transport costs stemming from the rise in fuel prices 4. An increased prevalence of climatic shocks (as in Niger or Uganda), politi- cal instability (as in Kenya, Somalia, or Sudan), strong regional spillovers into neighboring markets (such as Kenya’s impact on Uganda; Benson et al. 2008), and relatively loose monetary or fiscal policies (as in Ethiopia or Malawi)4


5. High rates of substitution between international cereals and domestic staples (such as for beans, cassava, millet, and sorghum)


On this final point, however, we can offer relatively little evidence. In addi- tion, historical evidence on elasticities of substitution may provide limited guidance because of rapid urbanization and because demand elasticities dur- ing crises may differ from those that prevail in normal times.


3 FEWSNET data are available at <http://www.fews.net/Pages/markettrade.aspx>. 4 These factors contribute to price rises independently of international transmission but could also reinforce transmission.


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