Linkages among commodity futures markets and dynamic welfare analysis

Gordon Rausser and Nicholas A. Walraven

Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series from Department of Agricultural & Resource Economics, UC Berkeley

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 futures 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 allover-react 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 markets.

Keywords: economics; equilibrium; exchange rates; future trading; interest; prices; Social and Behavioral Sciences (search for similar items in EconPapers)
Date: 1990-07-01
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Citations: View citations in EconPapers (11)

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