Commodity Market Financialisation: A Closer Look at the Evidence

Alexandra Dwyer, James Holloway and Michelle Wright
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Alexandra Dwyer: Reserve Bank of Australia
James Holloway: Reserve Bank of Australia
Michelle Wright: Reserve Bank of Australia

RBA Bulletin (Print copy discontinued), 2012, 65-77

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.

Keywords: commodity prices; financialisation; financialization; spot prices; futures prices; financial investors; speculators; macroeconomic fundamentals; Granger causality; principal component analysis (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (8)

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