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A Second Look At The 2007-08 Food Price Crisis: Considering The Impact Of Endogenous Dynamics On Food Prices, Luigi Russi
A Second Look At The 2007-08 Food Price Crisis: Considering The Impact Of Endogenous Dynamics On Food Prices, Luigi Russi
Luigi Russi
This paper offers an alternative to the conventional explanation of the 2007-08 food price crisis in terms of escalating demand or dwindling supply. Instead, its focus is on the legal institutional structure of commodity futures markets, which has witnessed a drastic alteration in the role of speculators. These have transformed from “market makers” (that keep commodity futures markets liquid by arbitraging on price fluctuations) to “market breakers”. Index speculation, in particular, has had the effect of muddling information about market “fundamentals” because of the need – brought about by commodity index swaps – for swap dealers to hedge the fluctuations …