I. Introduction Few economic events of the past fifty years were more dramatic than the Asian financial crisis of 1997-98. Economic and political circumstances in Thailand, South Korea, Malaysia, Indonesia, and the Philippines produced severe currency depreciation and recession previously unknown to the region. While the causes and consequences of the crisis are thoroughly addressed elsewhere (for example, Woo, Carleton, and Rosario 2000; Pesenti and Tille 2000; Kamin 1999), a largely unexplored issue is the impact on food security. On the one hand, depreciation and recession make it difficult for low-income households to obtain adequate food supplies (Rosegrant and Ringler 1998; Barichello 1998; Booth 1998; Mya Than 2001). Depreciation also increases the relative price of traded goods, including most agricultural commodities, so that the crisis countries should experience increases in rural income, food production, and long-term food security (Barichello 1998; Booth 1998). A third potential issue is unique to food-importing countries. During a financial crisis, capital flight and financial contagion cause the capital account to become negative and require an offsetting surplus in the current account, assuming foreign exchange reserves are negligible. In principle, this adjustment occurs via increased export revenues or decreased import expenditures, though Higgins and Klitgaard (2000) confirm that import expenditures and import volume decreased substantially during the Asian financial crisis. If staple food imports also decrease, available food supplies would fall and harm short-run food security. A similar scenario occurs when price or production shocks increase the cost of food imports compared with available foreign exchange supplies. This article explores the connection between foreign exchange supplies, food security, and the financial crisis of 1997-98 in Indonesia and the Philippines. Of all the Asian crisis countries, Indonesia and the Philippines are examined separately because of their low per capita incomes and vulnerability to short- and long-term food insecurity. Both countries are also highly dependent on cereal consumption and are net cereal importers, with food grains comprising the bulk of cereal imports. Section II of the article reviews prior studies regarding balance of payments shocks and food security. Section III constructs a working definition of food security and examines the specific conditions in Indonesia and the Philippines. The methodology, data, and regression model are described in Section IV, followed by estimation results in Section V. The article concludes with implications for food security and balance of payments policies. II. Background Previous studies of foreign exchange supplies and food security primarily address compensatory financing issues. Compensatory financing allows countries experiencing short-term food shortages to obtain foreign exchange for food imports at favourable terms from the International Monetary Fund (IMF) or other institutions. Valdes and Konandreas (1981) show that countries not normally dependent on food imports must occasionally use a significant share of their export revenues for food imports during price or production shocks. Goreux (1981) explains how the IMF's compensatory scheme for stabilizing export revenues from the 1970s could be modified to accommodate cereal imports during consumption shortfalls. (1) Huddleston et al. (1984) examine the IMF's Compensatory and Contingency Financing Facility (CCFF) and find potential for offsetting temporary and sudden food import shocks. Others are less supportive of the CCFF (Green 1983; Green and Kirkpatrick 1982; Kumar 1989; Diakosavvas and Green 1998), arguing that it gives too much attention to stabilizing export revenue and insufficient attention to food consumption. An implicit question in the above studies is whether foreign exchange supplies actually constrain food imports. …

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