Commodities, financialization, and heterogeneous agents

Arbeitspapier

The term 'financialization' describes the phenomenon that commodity contracts are traded for purely financial reasons and not for motives rooted in the real economy. Recently, financialization has been made responsible for causing adverse welfare effects especially for low-income and low-wealth agents, who have to spend a large share of their income for commodity consumption and cannot participate in financial markets. In this paper we study the effect of financial speculation on commodity prices in a heterogeneous agent production economy with an agricultural and an industrial producer, a financial speculator, and a commodity consumer. While access to financial markets is always beneficial for the participating agents, since it allows them to reduce their consumption volatility, it has a decisive effect with respect to overall welfare effects who can trade with whom (but not so much what types of instruments can be traded).

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: SAFE Working Paper ; No. 131 [rev.]

Classification and Topics

• Classification: Wirtschaft ; Macroeconomics: Production ; Asset Pricing; Trading Volume; Bond Interest Rates ; Contingent Pricing; Futures Pricing; option pricing ; Agriculture: Aggregate Supply and Demand Analysis; Prices ; Welfare, Well-Being, and Poverty: General
• Subject: Commodities ; General Equilibrium ; Heterogeneous Preferences ; Financial Markets

Contributors, Location and Time

• Event: Geistige Schöpfung
• (who): Branger, Nicole ; Grüning, Patrick ; Schlag, Christian
• Event: Veröffentlichung
• (who): Goethe University Frankfurt, SAFE - Sustainable Architecture for Finance in Europe
• (where): Frankfurt a. M.
• (when): 2016

Further information

• DOI: doi:10.2139/ssrn.2759314
• Handle: http://hdl.handle.net/10419/146787
• URN: urn:nbn:de:hebis:30:3-400631
• Last update: 10.03.2025, 11:43 AM CET