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Trading Practices and Price Dynamics in Commodity Markets and the Stabilising Effects of a Transaction Tax

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  • Stephan Schulmeister

Abstract

Movements of commodity prices like the prices of crude oil, corn, wheat and rice are to a substantial extent lengthened and strengthened by speculation in the respective futures markets. In particular the widespread use of technical trading systems reinforces the trending behaviour of commodity prices. The impact of these trading practices on price overshooting was particularly pronounced during the recent commodity price boom. These conclusions can be derived from the performance of 1,092 trading systems in the futures markets for crude oil, corn, wheat and rice between 1989 and mid-2008 as well as from the impact of the aggregate trading behaviour of these models on the simultaneous and subsequent price movements. It is highly plausible that a financial transaction tax would dampen the volatility of commodity prices.

Suggested Citation

  • Stephan Schulmeister, 2009. "Trading Practices and Price Dynamics in Commodity Markets and the Stabilising Effects of a Transaction Tax," WIFO Studies, WIFO, number 34919.
    • Handle: RePEc:wfo:wstudy:34919
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    References listed on IDEAS

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    24. Stephan Schulmeister & Margit Schratzenstaller-Altzinger & Oliver Picek, 2008. "A General Financial Transaction Tax. Motives, Revenues, Feasibility and Effects," WIFO Studies, WIFO, number 31819, March.
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    Citations

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    Cited by:

    1. Stephan Schulmeister, 2014. "A General Financial Transactions Tax. Motives, Effects and Implementation According to the Proposal of the European Commission," WIFO Working Papers 461, WIFO.
    2. Staritz, Cornelia & Küblböck, Karin, 2013. "Re-regulation of commodity derivative markets: Critical assessment of current reform proposals in the EU and the US," Working Papers 45, Austrian Foundation for Development Research (ÖFSE).
    3. Stephan Schulmeister, 2012. "Technical Trading and Commodity Price Fluctuations," WIFO Studies, WIFO, number 45238, March.
    4. Filip Novotný, 2012. "The Link Between the Brent Crude Oil Price and the US Dollar Exchange Rate," Prague Economic Papers, Prague University of Economics and Business, vol. 2012(2), pages 220-232.
    5. Stefan Ederer & Christine Heumesser & Cornelia Staritz, 2016. "Financialization and commodity prices -- an empirical analysis for coffee, cotton, wheat and oil," International Review of Applied Economics, Taylor & Francis Journals, vol. 30(4), pages 462-487, July.
    6. Sinha, Pankaj & Mathur, Kritika, 2015. "Impact of Commodities Transaction Tax on Indian Commodity Futures," MPRA Paper 63677, University Library of Munich, Germany.
    7. Swamy Perumandla & Padma Kurisetti, 2021. "Commodity Transaction Tax (CTT): Nature of Correlation Dynamics and Volatility Linkages Between Indian Commodity and Equity Markets," International Journal of Asian Business and Information Management (IJABIM), IGI Global, vol. 12(2), pages 16-36, April.
    8. Stephan Schulmeister, 2010. "Langsame Belebung der weltweiten Wachstumsdynamik. Mittelfristige Prognose der Weltwirtschaft bis 2014," WIFO Monatsberichte (monthly reports), WIFO, vol. 83(1), pages 37-45, January.
    9. Troester, Bernhard & Staritz, Cornelia, 2013. "Fundamentals or financialisation of commodity markets: What determines recent wheat prices?," Working Papers 43, Austrian Foundation for Development Research (ÖFSE).
    10. Stephan Schulmeister, 2009. "Die neue Weltwirtschaftskrise - Ursachen, Folgen, Gegenstrategien," Working Paper Reihe der AK Wien - Materialien zu Wirtschaft und Gesellschaft 106, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik.
    11. Stephan Schulmeister, 2009. "Eine generelle Finanztransaktionssteuer. Konzept, Begründung, Auswirkungen," WIFO Working Papers 352, WIFO.
    12. Stephan Schulmeister, 2011. "Implementation of a General Financial Transactions Tax," WIFO Studies, WIFO, number 41992, March.
    13. Österreichische Forschungsstiftung für Internationale Entwicklung (ÖFSE) (ed.), 2015. "Österreichische Entwicklungspolitik 2015. Rohstoffe und Entwicklung," Austrian Development Policy Report, Austrian Foundation for Development Research (ÖFSE), number 268194.
    14. Fritz Breuss, 2009. "The Financial Crisis as an Overshooting Phenomenon," WIFO Working Papers 336, WIFO.
    15. Ederer, Stefan & Heumesser, Christine & Staritz, Cornelia, 2013. "The role of fundamentals and financialisation in recent commodity price developments: An empirical analysis for wheat, coffee, cotton, and oil," Working Papers 42, Austrian Foundation for Development Research (ÖFSE).
    16. Stephan Schulmeister, 2009. "Technical Trading and Trends in the Dollar-Euro Exchange Rate," WIFO Studies, WIFO, number 37582, March.
    17. Fritz Breuss, 2009. "Finanzmarktkrise als Phänomen des Überschießens auf den Aktienmärkten. Eine theoretische Analyse," WIFO Monatsberichte (monthly reports), WIFO, vol. 82(12), pages 933-941, December.
    18. Staritz, Cornelia, 2012. "Financial markets and the commodity price boom: Causes and implications for developing countries," Working Papers 30, Austrian Foundation for Development Research (ÖFSE).

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