Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/146787
Authors: 
Branger, Nicole
Grüning, Patrick
Schlag, Christian
Year of Publication: 
2016
Series/Report no.: 
SAFE Working Paper Series 131 [rev.]
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).
Subjects: 
Commodities
General Equilibrium
Heterogeneous Preferences
Financial Markets
JEL: 
E23
G12
G13
Q11
I30
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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