Blog Post

Regulating Commodity Exchanges in an Interdependent World

With an estimated 44 million people falling into poverty since June 2010, rising food prices and increasing agricultural price volatility is at the forefront of global attention. Commodity exchanges have long been touted as a way to mitigate the effects of price volatility and increase economic efficiency in a liberalized market environment. As with other aspects of global agricultural markets, however, exchange markets are facing increasing global interdependence as traders draw on information generated both domestically and internationally.

Understanding how exchange markets, particularly futures markets, interact is critical in designing appropriate regulatory policies to address excessive volatility. In order for regulation of commodity exchanges to be truly effective, policymakers must look at where and how exchanges are linked so that regulation can be coordinated across borders when necessary.

Recent research conducted by IFPRI has looked into the level of interdependence and volatility transmission in major agricultural exchanges in the United States, EU, and Asia. This research provides important insights into the dynamic price relationship of international exchange markets. Watch IFPRI researcher Manuel Hernandez discuss the preliminary results.
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Video: Regulation of Global Commodity Exchanges

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