Anatomy of a crisis: the causes and consequences of surging food prices

Although the potential causes and consequences of recent rising international food prices have attracted widespread attention, many existing appraisals are superficial and/or piecemeal. This article attempts to provide a more comprehensive review of these issues based on the best and most recent research, as well as on fresh theoretical and empirical analysis. We first analyze the causes of the current crisis by considering how well standard explanations hold up against relevant economic theory and important stylized facts. Some explanations turn out to hold up much better than others, especially rising oil prices, the depreciation of the U.S. dollar, biofuels demand, and some commodity-specific explanations. We then provide an appraisal of the likely macro- and microeconomic impacts of the crisis on developing countries. We observe a large gap between macro and micro factors, which, when identifying the most vulnerable countries, often point in different directions. We conclude with a brief discussion of what ought to be learned from this crisis.