Commodity Market Linkages in the Global Financial Crisis: Excess Volatility and Development Impacts

Machiko Nissanke

Journal of Development Studies, 2012, vol. 48, issue 6, 732-750

Abstract: This 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.

Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (39)

Downloads: (external link)
http://hdl.handle.net/10.1080/00220388.2011.649259 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:jdevst:v:48:y:2012:i:6:p:732-750

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/FJDS20

DOI: 10.1080/00220388.2011.649259

Access Statistics for this article

Journal of Development Studies is currently edited by Howard White, Oliver Morrissey and Ken Shadlen

More articles in Journal of Development Studies from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().