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Commodity Prices, Financial Markets, and Development

Financialisation of Commodity Markets and Necessary Policy Reforms

Cornelia Staritz / Christine Heumesser / Karin Küblböck

Wien, Oktober 2013

Given the far-reaching implications of commodity prices in particular for developing countries, an understanding of the factors behind recent commodity price developments is crucial. Recent ÖFSE research shows that besides important structural changes in fundamental supply and demand conditions of many commodities, the increasing presence of financial investors on commodity derivative markets has impacted on price dynamics and the microstructure of these markets. This questions to what extent these markets still fulfill their fundamental roles, i.e. price discovery and price risk management (hedging), in particular for smaller commercial traders. In light of these findings, regulations of commodity derivates markets are required to reduce excessive speculation and ensure the fundamental roles of commodity derivative markets.

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