No Theory? No Evidence? No Problem!
Year: 2010
Type: preprint
Abstract: Policymakers in Congress and at the Commodity Futures Trading Commission are currently considering placing tight restrictions on the buying and selling of commodity futures. They worry that the growing trade in these contracts represents “speculation” that affects the price of commodities to the detriment of consumers. This concern conflicts with long-settled economics and law on commodities, which have determined that the buying and selling of such futures cannot affect the price of those commodities for consumption. This paper examines both the current and traditional view of commodities and argues that the traditional view is correct - not only does futures trading not harm consumers, but restricting that trading could reduce firms’ ability to hedge against detrimental changes in commodity prices.
Source: SSRN Electronic Journal
Author: Craig Pirrong
Institution: University of Houston
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W1573184060