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Analyzing the structural transformation of commodity markets: financialization revisited

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  • Filippo Natoli

    (Bank of Italy)

Abstract

The first decade of the 21st century saw wide fluctuations in commodity prices and a massively increased participation of financial investors in the commodity derivatives markets. The investigation of whether the presence of financial investors was responsible for these fluctuations - and, more in general, whether large trades affected futures and spot prices - has yielded mixed results in the literature. We take up this question by linking financialization to the ongoing structural transformation of the commodity markets. First, we discuss issues related to the identification of the price effects of financialization; then, we present models of commodity markets with heterogeneous agents and informational frictions and discuss the role of financial investors as the counterparts of commercial hedgers. Lastly, we suggest some avenues for future research, including the possible implications of the shale revolution and of commodity trading in the financialization process.

Suggested Citation

  • Filippo Natoli, 2018. "Analyzing the structural transformation of commodity markets: financialization revisited," Questioni di Economia e Finanza (Occasional Papers) 419, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:opques:qef_419_18
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    References listed on IDEAS

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    More about this item

    Keywords

    commodity; oil; financialization; speculation; limits to arbitrage; informational frictions;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market

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