Template-Type: ReDIF-Paper 1.0
Author-Name: Nicole Branger
Author-X-Name-First: Nicole
Author-X-Name-Last: Branger
Author-Email: nicole.branger@wiwi.uni-muenster.de
Author-Workplace-Name: University of Muenster
Author-Name: Patrick Grüning
Author-X-Name-First: Patrick
Author-X-Name-Last: Grüning
Author-Email: PGruening@lb.lt
Author-Workplace-Name: Bank of Lithuania
Author-Name: Christian Schlag
Author-X-Name-First: Christian
Author-X-Name-Last: Schlag
Author-Email: schlag@finance.unifrankfurt.de
Author-Workplace-Name: Goethe University Frankfurt
Title: Commodities, financialization, and heterogeneous agents
Abstract: 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).
Classification-JEL: E23, G12, G13, Q11, I30
Keywords: Commodities, General Equilibrium, Heterogeneous Preferences, Financial Markets
Length: 69 pages
Number: 25
Note:
Creation-date: 2016-04-12
Price: Free
Publication-Status: 
File-URL: https://www.lb.lt/uploads/publications/docs/20770_9a295d3807d11d6f144fe1ff48dc1f59.pdf
File-Format: Application/PDF
File-Function: Full text
Handle: RePEc:lie:wpaper: 25