Files

Abstract

Agricultural commodity markets are volatile, thus inefficient: prices never equate long run marginal costs. In order to correct such a situation, one has to understand where does volatility comes from. Everybody congregate on the fact that large price fluctuations are the consequence of small supply fluctuations magnified by a rigid demand. But there exists two alternative explanations of supply changes. The exogenous explanation relies on natural events, such as climatic accidents. The endogenous explanation focuses on expectations and the way actual markets are operating. Making the distinction between these two theoretical basis is very important, since the remedies to volatility are completely different, even opposite, according to which of them actually holds.

Details

PDF

Statistics

from
to
Export
Download Full History