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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]

The present paper describes the benefits and costs, in qualitative terms, of managing food price instability in Asia in the context of promoting economic growth and poverty reduction to improve food security. The experience of Asian governments in actual practice with price stabilization is discussed in the context of managing an efficient transition to market-mediated food security. Recent experience in Indonesia, where a sharp increase in rice prices (caused by a ban on rice imports) pushed 4 million people into poverty, provides continued motivation for the analytical story in this paper. [ABSTRACT FROM AUTHOR]