Using a public dataset of trader positions in 17 U.S. commodity futures markets, we compute an index of "excess" speculation (speculative activity beyond meeting net hedging demand) to provide evidence of those markets' financialization during the past decade. Controlling for commodity supply and demand fundamentals, we show that this index helps predict the dynamic conditional correlation between the rates of return on commodities and on equities. The predictive power of the speculative index is weaker in periods of generalized financial market stress. Our results support the notion that who trades helps predict the joint distribution of commodity and equity returns.JEL Classification: G10, G12, G13, G23

Macroeconomic fluctuations are much stronger in developing countries than in the United States. Yet, while a large literature debates the welfare cost of economic fluctuations in the United States, it remains an open question how large that cost is in developing countries. Using several models, we provide such a measure. We find that the welfare cost of consumption volatility per se is far from trivial and averages a substantial multiple of the corresponding U.S. estimate. Moreover, in many poor countries, the welfare gain from eliminating volatility may in fact exceed the welfare gain from an additional percentage point of growth forever.

In this paper, we document empirical regularities in the foreign aid flows to developing countries over the last three decades. In spite of a large body of literature on foreign aid and its impact on recipients, surprisingly little is known about its business cycle characteristics. We show that for the vast majority of African recipients, aid flows are a major source of income that is highly volatile and, most importantly, overwhelmingly procyclical. For recipients outside of Africa, we find a similar -if somewhat less pronounced -pattern of aid procyclicality. In contrast, there is little evidence of aid procyclicality with the business cycle of donors. In light of the very high volatility of output in developing countries, the procyclicality of foreign aid flows from the recipients' perspective raises serious questions related to their welfare and growth.

Fund (IMF), the European Central Bank (ECB), the CFTC and the U.S. Securities and Exchange Commission (SEC) for helpful comments. An companion paper was presented at the Annual Meeting of the Financial Management Association in New York, the 2 nd CEPR Conference on Hedge Funds (HEC-Paris) and the 20 th Cornell-FDIC Conference on Derivatives. This paper builds on results derived as part of research projects for the CFTC and the SEC (Robe) and the CFTC and the IEA (Büyükşahin). The CFTC, SEC and IEA, as a matter of policies, disclaim responsibility for any private publication or statement by any of their employees or consultants. The views expressed herein are those of the authors only and do not necessarily reflect the views of the CFTC, the SEC, the Commissioners, or other staff at either Commission; or the IEA, member governments, or other IEA staff. Errors and omissions, if any, are the authors' sole responsibility.