Financialization in Commodity Markets

Varadarajan Chari and Lawrence Christiano

No 23766, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Recent experience has given rise to the financialization view: increased trading in commodity fu­tures markets leads to an increase in the level and volatility of spot prices. We construct a large panel data set which includes commodities with and without futures markets. The data do not support the financialization view. We also find that futures returns are positively correlated with open interest and not correlated with net financial flows. The facts on spot and futures prices and volume necessitate a new view, which we develop, of the economic role of futures markets. Our model is consistent with the key facts.

JEL-codes: E02 G12 G21 (search for similar items in EconPapers)
Date: 2017-09
New Economics Papers: this item is included in nep-mac and nep-mst
Note: EFG
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Citations: View citations in EconPapers (19)

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Related works:
Working Paper: Financialization in Commodity Markets (2017)
Working Paper: Financialization in Commodity Markets (2017)
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