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Abstract: This paper describes the benefits and costs of managing food price instability in the context of promoting economic growth and poverty reduction in order to improve food security. Some key costs of stabilizing domestic food prices include disruption of international markets, crowding out of private traders if government procurement is too large or destabilizes expectations, and large financial costs if the gap between domestic and world prices is too large, although a well-run program need not incur most of those costs. In poor countries, stable staple food prices help prevent poor farmers and consumers from falling into poverty traps, promote farm-level investment, and encourage investment throughout the economy by reducing the “noise” in prices of other goods and by promoting social and political stability. Because of these benefits, domestic rice price stabilization has been an integral part of the development vision in Asia. [Copyright &y& Elsevier]

A survey of households in rural Java is used to assess the nutritional impact of Indonesia’s drought and financial crisis of 1997/1998. A time-age-cohort decomposition reveals significant nutritional impacts. However, child weight-for-age (WAZ) remained constant throughout the crisis, despite rapid increases in food prices and the consequent household consumption shock. The evidence is consistent with the hypothesis that within households, mothers buffered children’s caloric intake, resulting in increased maternal wasting. However, reductions in the consumption of high-quality foods further resulted in increased prevalence of anemia for both mothers and children. The combined effects were particularly severe for cohorts conceived and weaned during the crisis. [Copyright &y& Elsevier]