Price volatility is one of the most critical economic and food security challenges facing global policymakers today. Moreover, spikes in food prices can have significant impact on incomes, markets, and nutrition worldwide. In extreme cases, food price volatility can have serious political and social repercussions; in the 2007-08 food price crisis, 33 countries saw violent riots and social unrest as a result of volatile food prices, while in 2011, food price spikes have been at least partially blamed for political turnover in Tunisia and Egypt, as well as riots in several other countries.
Extreme price fluctuations often lead to political and market overreaction such as export restrictions. While such policies are designed to protect the population of a particular country or region, they can have devastating consequences for global food security. Understanding the causes behind price volatility, and the policy options that exist for dealing with periods of volatile food prices, can significantly lessen the likelihood of policymakers engaging in such knee-jerk responses.
For more information on price volatility, see the Excessive Food Price Variability Early Warning System
Download the report by IFPRI Division Director Maximo Torero on alternative mechanisms to reduce price volatility.