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Linkages among Commodity Futures Markets and Dynamic Welfare Analysis

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  • Rausser, Gordon C
  • Walraven, Nicholas A

Abstract

This study constructs dynamic welfare measures for a system of futures markets that express the allocative efficiency of a particular market as a function of its accuracy and speed of adjustment following a shock to the system. The system comprises future prices for T-bills, exchange rates (German mark, British pound, Canadian dollar and yen), and agricultural commodities (corn, wheat, and cotton) for delivery in 1981 and 1982. The results suggest that, although agricultural, exchange, and financial markets all overreact to a disturbance, agricultural markets do so to a much greater degree. Owing to their much greater size, however, the welfare loss arising from the overshooting is likely to be much larger for interest rate and exchange. Copyright 1990 by MIT Press.

Suggested Citation

  • Rausser, Gordon C & Walraven, Nicholas A, 1990. "Linkages among Commodity Futures Markets and Dynamic Welfare Analysis," The Review of Economics and Statistics, MIT Press, vol. 72(4), pages 631-639, November.
    • Handle: RePEc:tpr:restat:v:72:y:1990:i:4:p:631-39
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    Citations

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    Cited by:

    1. Yannick Le Pen & Benoît Sévi, 2013. "Futures trading and the excess comovement of commodity prices," Post-Print hal-01613916, HAL.
    2. repec:dau:papers:123456789/11382 is not listed on IDEAS
    3. Colin A. Carter & Gordon C. Rausser & Aaron Smith, 2011. "Commodity Booms and Busts," Annual Review of Resource Economics, Annual Reviews, vol. 3(1), pages 87-118, October.
    4. repec:ipg:wpaper:2013-019 is not listed on IDEAS
    5. repec:ipg:wpaper:19 is not listed on IDEAS
    6. Stefani, Gianluca & Valli, Carlotta, 2004. "Exploring the Impacts of Risk Communication Policies on Welfare: Theoretical Aspects," 84th Seminar, February 8-11, 2004, Zeist, The Netherlands 24989, European Association of Agricultural Economists.
    7. Wolfram Schlenker & Sofia B. Villas-Boas, 2009. "Consumer and Market Responses to Mad Cow Disease," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(4), pages 1140-1152.
    8. Wolfram Schlenker & Sofia B. Villas-Boas, 2009. "Consumer and Market Responses to Mad Cow Disease," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(4), pages 1140-1152.

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