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How to Understand High Food Prices

Christopher L. Gilbert ()

No 823, Department of Economics Working Papers from Department of Economics, University of Trento, Italia

Abstract: Commodity price booms are best explained by macroeconomic rather than market-specific factors. I argue that the rise in food prices over 2007 and the first half of 2008 should be seen as part of the wider commodity boom which is largely the result of rapid economic growth in China and throughout Asia in a context of loose money and in which, because of previous low investment, supply was inelastic. The demand for grains and oilseeds as biofuel feedstocks was the main cause of the price rise but macroeconomic and financial factors explain its extent. The futures market may be an important monetary transmission mechanism, but it is commodity investors, not speculators, who, by investing in commodities as an asset class, may have generalized prices rises across markets.

Keywords: Food prices; commodity prices; money; futures markets (search for similar items in EconPapers)
JEL-codes: Q11 (search for similar items in EconPapers)
Date: 2008
New Economics Papers: this item is included in nep-agr and nep-sea
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