The financialization of commodity markets

The build-up and eruption of the current global financial crisis was paralleled by an unusually sharp increase and subsequent strong reversal in the prices of internationally traded primary commodities. Recent developments in commodity prices have been exceptional in many ways. The price boom between 2002 and mid-2008 was the most pronounced in several decades – in magnitude, duration and breadth. It placed a heavy burden on many developing countries that rely on food and energy imports, and contributed to food crises in a number of countries in 2007–2008 (TDR 2008, chap. II, section C). The price decline since mid-2008 stands out both for its sharpness and for the number of commodity groups affected. It was one of the main channels through which the dramatic slowdown of economic and financial activity in the major industrialized countries was transmitted to the developing world.

Related Subject(s): International Trade and Finance