March 2015 - Manisha Pradhananga, Assistant Professor of Economics at Knox College, is the author of the PERI Working Paper: Financialization and the Rise in Comovement of Commodity Prices. Pradhananga completed her PhD in Economics at UMass in 2014, and was a PERI Research Assistant during her time in Amherst. Here, she speaks with PERI about her research on the financialization of commodities.
What brought you to ask why and how unrelated commodity prices rose (and fell) together?
During my second year at UMass, Professor Jayati Ghosh gave a talk at PERI in which she discussed the then-ongoing food crisis, precipitated by a sharp rise in commodity prices that peaked in June 2008. Professor Ghosh suggested that speculation in the commodities futures market was a major cause for the rise in price, not rise in demand from emerging markets (India and China) and drought like others had claimed. Before her talk, I did not know how Big Finance is connected to commodity prices, and was shocked to discover that food and other commodities are now considered just another asset like stocks and bonds that you can add to your portfolio. Shortly after that I wrote a paper on the topic for my applied econometrics class with Bob Pollin and Michael Ash, which basically started my dissertation research.
What are the ramifications of the comovement of these unrelated commodities? How do these price shifts affect producers, suppliers, and consumers?
Comovement of unrelated commodities point to a larger issue which we have termed
