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Soft commodities and the global financial crisis: Implications for the economy, resources and institutions

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  • Karyotis, Catherine
  • Alijani, Sharam

Abstract

Over the past decade, soft commodities have been subjected to increasing speculative price fluctuations. Following the 2008 financial crisis, most studies have highlighted causal relationships between price volatility, derivative and future markets for underlying financial assets as well as agricultural and mineral commodities. This article investigates the multifaceted effects of unrestrained financialization of the resources and goods markets and its implications for agricultural markets and soft commodities for purposes other than direct human consumption. We place a particular emphasis on the process of commodification of food and non-food crops and their use as green source of liquid fuels (i.e. soy, sugar cane, palm oil, jatropha, and canola). It is argued that speculation in financial markets has led to spillover effects across commodity and resource markets. More importantly, speculation and price volatility in the commodity markets has had a direct bearing on the resource markets and organization and appropriation of common-pool resources. The article sheds further light on the causal relationship between derivative markets, hedging techniques, financial yields and price volatility and spillover effects in the market for food and soft commodities.

Suggested Citation

  • Karyotis, Catherine & Alijani, Sharam, 2016. "Soft commodities and the global financial crisis: Implications for the economy, resources and institutions," Research in International Business and Finance, Elsevier, vol. 37(C), pages 350-359.
  • Handle: RePEc:eee:riibaf:v:37:y:2016:i:c:p:350-359
    DOI: 10.1016/j.ribaf.2016.01.007
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    References listed on IDEAS

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    1. repec:eee:riibaf:v:41:y:2017:i:c:p:148-157 is not listed on IDEAS
    2. Baldi, Lucia & Peri, Massimo & Vandone, Daniela, 2016. "Stock markets’ bubbles burst and volatility spillovers in agricultural commodity markets," Research in International Business and Finance, Elsevier, vol. 38(C), pages 277-285.
    3. repec:eee:riibaf:v:47:y:2019:i:c:p:10-17 is not listed on IDEAS
    4. Kang, Sang Hoon & McIver, Ron & Yoon, Seong-Min, 2017. "Dynamic spillover effects among crude oil, precious metal, and agricultural commodity futures markets," Energy Economics, Elsevier, vol. 62(C), pages 19-32.

    More about this item

    Keywords

    Financialization; Soft commodity derivatives; Agricultural markets; Common-pool resources;

    JEL classification:

    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • P48 - Economic Systems - - Other Economic Systems - - - Political Economy; Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies
    • Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy

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