One of the hot topics in the media currently is the rise of food prices and the effect its having around the world. But what's causing those rising prices? A new article in AEPP finds that the recent rise of prices in commodities, including food prices, was not caused by an increase in speculative investments, as some have suggested.
"There simply isn’t compelling evidence" that the rise in prices was caused by index fund investment, says Scott Irwin of University of Illinois, lead author on the article. "It is not surprising that a debate has ensued about the role of index funds in commodity futures markets," he says. "Very limited traces of linkage between the two are visible, however. To date, no ‘smoking gun’ has been found."
In the latest AEPP podcast, you can hear Irwin discuss these findings, including the possible policy implications, as new limits on speculation in these markets are being discussed. If you'd like to read the full text of the article, AAEA members can login to the My Account section and click on the link for AEPP.