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Commodity Market Financialisation: A Closer Look at the Evidence

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Author Info

  • Alexandra Dwyer

    (Reserve Bank of Australia)

  • James Holloway

    (Reserve Bank of Australia)

  • Michelle Wright

    (Reserve Bank of Australia)

Registered author(s):

    Abstract

    There is some debate about whether financial investors have caused excessive increases in the level and volatility of commodity prices. These investors are viewed by some as being less concerned with fundamentals than traditional market participants and hence impeding the price discovery process – that is, they are destabilising speculators or ‘noise traders’. This article discusses the relationship between the futures markets for commodities (where financial investors are most active), and the spot markets. It then argues that the evidence does not support the hypothesis that financialisation has been the main driver of commodity price developments in the 2000s.

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    File URL: http://www.rba.gov.au/publications/bulletin/2012/mar/pdf/bu-0312-8.pdf
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    Bibliographic Info

    Article provided by Reserve Bank of Australia in its journal RBA Bulletin.

    Volume (Year): (2012)
    Issue (Month): (March)
    Pages: 65-77

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    Handle: RePEc:rba:rbabul:mar2012-08

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    Related research

    Keywords: commodity prices; financialisation; financialization; spot prices; futures prices; financial investors; speculators; macroeconomic fundamentals; Granger causality; principal component analysis;

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    1. Renee Fry & Callum Jones & Christopher Kent, 2010. "Inflation in an Era of Relative Pirce Shocks," CAMA Working Papers 2010-38, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    2. Renee Fry & Callum Jones & Christopher Kent, 2010. "Inflation in an Era of Relative Pirce Shocks," CAMA Working Papers 2010-38, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
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