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Is the interest rate more important than inventories? The case of agricultural commodities in the context of the financialization process

Author

Listed:
  • Esteban Thomasz

    (Centro de Investigación en Métodos Cuantitativos Aplicados a la Economía y la Gestión (CMA))

  • Juan Massot

    (Centro de Investigación en Métodos Cuantitativos Aplicados a la Economía y la Gestión (CMA))

  • Gonzalo Rondinone

    (Centro de Investigación en Métodos Cuantitativos Aplicados a la Economía y la Gestión (CMA))

Abstract

In the context of the “Asian economic miracle”, changes in commodity prices between 2004 and 2014 may have been dominated by the effects of the entry of portfolio investors as major participants in commodity index positions and new financial products. That situation raises the question of whether interest rates have a deeper effect on prices compared to fundamental variables such as commodity inventories. The aim of this paper is therefore to test if the prices of some commodities (soybean and maize) have become more sensitive to interest rate changes compared to the incidence of inventories in the last ten years. Using a vector autorregression, it was found that during the period 2004-2014 there was a stronger relation between interest rates and soybean and maize futures prices than in the years 1990-2003. This empirical evidence has special relevance for some Latin American countries heavily reliant on such commodity exports

Suggested Citation

  • Esteban Thomasz & Juan Massot & Gonzalo Rondinone, 2016. "Is the interest rate more important than inventories? The case of agricultural commodities in the context of the financialization process," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 85, pages 127-153, Julio - D.
    • Handle: RePEc:lde:journl:y:2016:i:85:p:127-153
    DOI: 10.17533/udea.le.n85a04
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    Cited by:

    1. Gonzalo Rondinone & Esteban Otto Thomasz & Ana Silvia Vilker, 2019. "The economic cost of extreme and severe droughts in soybean production in Argentina," Contaduría y Administración, Accounting and Management, vol. 64(1), pages 31-32, Enero-Mar.

    More about this item

    Keywords

    agricultural commodities; financialization; interest rate; autoregressive vector system;
    All these keywords.

    JEL classification:

    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables

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