Commodity price volatility: causes and impact on the EU agricultural markets

Analiza 14-05-2010

Agricultural macroeconomic modelling has not yet adapted to the complexity of today’s world and cannot account for observed price volatility. Modelling financialized commodity markets requires a dynamics of anticipations under risk intertwined with economic dynamics, as defined here. Markets volatility doesn’t have one single cause and should be studied within global interconnected markets. Speculation appears as one major factor, together with monetary policy and some other well-known ones. Full liberalization of agriculture, if anything, should increase present volatility. Steps to limit volatility are suggested. The World GCE Momagri model could help defining a consistent policy in this respect.