The Financial Crisis and Its Impacts on Global Agriculture

Abstract

The financial crisis arose in the
 industrial countries, but has affected developing countries
 through higher interest rates, sharp changes in commodity
 prices, and reductions in investment, trade, migration and
 remittances. For most low-income countries, shocks that
 affect food prices or wage rates for unskilled workers seem
 likely to have the largest impact on poverty, with the
 declines in key food prices associated with the crisis
 helping to reduce poverty, while declining trade,
 investment, and remittance flows have had adverse impacts on
 the poor. Policies to address the crisis must include
 measures to deal with financial sector problems, the
 resulting reductions in aggregate demand, and the particular
 vulnerabilities of poor people. Given the complexity of the
 impacts from financial crises and commodity price shocks,
 there is a strong case for developing better social safety
 net policies that can offset the adverse impacts of a wide
 range of different shocks on poor people without creating
 costly market distortions.