Commodity Market Linkages in the Global Financial Crisis: Excess Volatility and Development Impacts
AbstractThis article examines how the increased interactions of financial and commodity markets have served as one fast transmission channel of the global financial crisis to the developing world. It suggests that a significant portion of the closely synchronised price dynamics in commodity and financial markets is explained by market liquidity cycles in global finance, as financial investors manage their portfolio at ease through ‘virtual’ stock holdings of commodities in derivatives dealings and markets. The article further argues that this has generated price volatility well in excess of what could be explained in demand-supply fundamentals, and that under such conditions futures markets would cease to perform their intended functions -- that of price discovery and risk hedging for physical commodity stakeholders. It explores the development impacts of excess price volatility and the case for innovative price stabilisation mechanisms.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Journal of Development Studies.
Volume (Year): 48 (2012)
Issue (Month): 6 (June)
Contact details of provider:
Web page: http://www.tandfonline.com/FJDS20
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Emiliano Magrini & Ayca Donmez, 2013. "Agricultural Commodity Price Volatility and Its Macroeconomic Determinants: A GARCH-MIDAS Approach," JRC-IPTS Working Papers JRC84138, Institute for Prospective and Technological Studies, Joint Research Centre.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty).
If references are entirely missing, you can add them using this form.