Financialisation of commodity markets as a factor of macroeconomic volatility and transformation of the role of commodity currencies in international trade

Шлапак, Алла Василівна (2023) Financialisation of commodity markets as a factor of macroeconomic volatility and transformation of the role of commodity currencies in international trade European scientific journal of Economic and Financial innovation (1(11)). pp. 20-29. ISSN 2617-8648

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Abstract

The purpose of the article is to study the processes of financialization of commodity markets as a factor of macroeconomic volatility and the transformation of the role of commodity currencies in international trade. Under the financialization of commodity markets, it is proposed to understand the processes of integration of commodity futures markets with other financial markets, as a result of which commodity prices began to be determined not only by supply and demand, but also by a wide range of financial factors and depend on the investment strategies of financial investors. The dependence of the financialization of commodity markets on the investment strategies professed by the participants of the financial market has been studied. The influence of regulators on the elimination of the consequences of the global financial crisis of 2007-2008 as a trigger for changes in existing channels of mutual influence between commodity currencies and commodity prices is considered. It is found that the financialization of commodity markets has contributed to the fact that commodities have become a viable asset class for both institutional and individual investors. At the same time, various commodities have undergone a different level of financialization, which determined the relationship between commodity prices, prices for financial assets and exchange rates of countries exporting raw materials. The growing influence of the financial market on the economies of national economies receives conflicting assessments from the scientific and expert communities. On the one hand, the so-called. "financialization" allows to attract capital to the real sector, thereby ensuring the development of the economies of the world, on the other hand, such integral components of this phenomenon as speculation significantly reduce the stability of these economies. Growing interdependence and intensification of capital movements, on the one hand, make markets more open and allow optimizing the distribution of capital resources, on the other hand, make it possible for crisis tendencies to spread across borders. Prices for key commodities (oil, metals, food) are formed on the derivatives exchange markets (without real delivery). Factors of demand, stocks, political events are related to the short-term conjuncture. Fundamental changes in the technological base of society, which could lead to radical changes in the prices of raw materials, are only accumulating. The transformation of commodity markets into financial ones leads to the fact that the exchange rate of the reserve currency - the US dollar, in which the predominant part of international settlements is made, begins to actively influence the prices of raw materials. The weakening of the US dollar leads to an increase in the price of assets in the markets, to the fact that the increase in prices becomes a compensation for the falling dollar. The strengthening of the US dollar is associated with negative movements in the value of assets. The correlation of commodity prices with the dollar is high. These relationships, as rigid, were established at the turn of the 2000s, which was the result of the financialization and securitization of raw materials, major changes in the microstructure of the market, and the transformation of raw materials into a financial commodity. Financial development trends include the financialization of the world economy, securitization of assets, and financial globalization. The fundamental factors in determining prices for raw materials include: demand, consumption, production, stocks, technology, geopolitics, and for the exchange rate - the business cycle, interest rate differential, macroeconomic variables (investment, savings, GDP production, etc.), macro-financial variables (inflation, budget surplus/deficit, balance of payments, capital accounts, etc.), monetary policy (interest rate, monetary aggregates). The internal mechanisms of the financial market, its microstructure, for example, modern technical trading algorithms that increase the importance of short-term strategies of currency speculators who make decisions on news often of a non-financial nature, form a new group of factors - market microstructure factors. These are micro- level factors that represent the structure of foreign exchange market participants regarding the method of making decisions on the purchase and sale of currency, the duration of the horizon for the formation of expectations, the investment period, as well as determining the speed and methods of transactions between participants.

Item Type:	Article
Uncontrolled Keywords:	commodity markets; financial markets; financializarion; commodity currencies; international trade; futures markets; spot markets; volatility; exchange rates; investors
Subjects:	Це архівна тематика Київського університету імені Бориса Грінченка > Статті у журналах > Фахові (входять до переліку фахових, затверджений МОН)
Divisions:	Це архівні підрозділи Київського університету імені Бориса Грінченка > Факультет економіки та управління > Кафедра міжнародної економіки
Depositing User:	Доцент Алла Василівна Шлапак
Date Deposited:	25 Jul 2023 07:51
Last Modified:	25 Jul 2023 07:51
URI:	https://elibrary.kubg.edu.ua/id/eprint/45731

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