Will the financialisation of agricultural products exacerbate food security risks? Empirical analysis from major grain-producing countries worldwide

Abstract

Based on data from 10 countries from the Chicago Mercantile Exchange (CBOT) wheat futures market for the period from 2000 to 2021, this study examines the impact of the financialisation of agricultural products on food security and its mechanism of action. We found that the higher the degree of financialisation of agricultural products, the stronger the negative effect on food security, which is more prominent after the financial crisis in 2008, and the effect on developing countries is more obvious than that on developed countries. The test results of the mediation effect model showed that the financialisation of agricultural products affects food security by increasing the volatility of futures prices. The test results of the moderating effect model showed that the rise of the US dollar index and loose monetary policy will exacerbate the impact of the financialisation of agricultural products on food security. Still, the increase of the self-sufficiency rate of food can effectively inhibit this impact. The study’s conclusions supported the government’s optimising macro policies and promoting food security.