Marta Szymanowska is Associate Professor of Finance at the Rotterdam School of Management (RSM). As a team member of Dynamics of Inclusive Prosperity, she works on an interdisciplinary project on values in finance. Besides this, she analyses how finance and financial markets can contribute to a solution of Sustainable Development Goal 2: ‘Zero hunger’. We live in a world, where enough food is produced to feed everyone. Yet one in nine people experience hunger or malnutrition.
Thinking as an economist, Szymanowska approach this problem as a puzzle: we have enough food, but still people are hungry. To seek for answers to this puzzle, she studies the markets on which foods are traded: agriculture commodity markets.
Agriculture is the single largest employer in the world. And poverty is most profound amongst food crop farmers in South America, South Asia and most countries in Africa. The problem is the extremely high volatility of commodity prices. Example: Paraguay, a large soybean exporter, saw the value of its soybean exports rise and then fall by over 400 million US dollars in a year.
How can financial markets help solving this problem?
“In one of my projects I study the informativeness of commodity future prices. I study global commodity future markets, where commodities like soy beans are traded. With the globalization trend, we’ve seen that the financial markets are affected by new investors coming in, or by strong changes in demand for example of commodities from China in recent years. Our first question was: whether and how the information in those global financial markets could be useful for economies around the world, including commodity-dependent markets like the economy of south Africa, which struggles a lot with stabilizing the economic growth because commodity prices by themselves are very volatile.
The first study shows that there is a lot of information in global markets that can be useful for predicting future inflation and industrial production growth in those developing countries. It is a first step. In the follow up study, I want to see what exactly those commodity-dependent economies can do and how can they benefit from developed global markets, in order to help smooth their production and in the end stabilize their incomes, wealth, and consequently reduce hunger.”
You mean, what can countries do to suffer less from volatile prices?
“Exactly. To either be less dependent on such fluctuations, or able to buy some kind of insurance to overcome the consequences. That connects to this SDG-goal. The next project in this research stream will be: getting towards direct policy implications. How commodity or financial markets can be used to help those unstable economies? Financial markets are there, for good or bad, so how can we use them for good?”
Can you give an example of a kind of policy advising solution?
“For example: Brazil is very strong in coffee production. There is a local commodities futures market for Brazilian coffee that operates in Brazil. But there is also a coffee futures market operating in Chicago. The Chicago one is bigger, has more investors, the prices are more efficient, et cetera. The Brazilian one might reflect better the properties of the Brazilian coffee. The question is: what roles do local and global commodity markets play for the Brazilian coffee producers, who are trying to hedge, or insure, against the price-risks? So far, I only looked at the global one.”
"I think that solutions to world problems are in looking beyond the current boundaries of research fields"
What is your research Values in finance about?
“I work together with associate professor of philosophy Conrad Heilmann, also from the research team of Dynamics of Inclusive Prosperity. It is a truly interdisciplinary work that we engage in. We want to look at the research done in the field of finance. Does the research in finance answer the relevant questions that it should answer? This is related to the outburst of criticism toward finance or economics in general after the financial crisis in 2008 – that economists were not able to foresee it. We would like to know things like: how finance should evolve, in order to be able to address questions of sustainability, inclusiveness, climate risk?”
That’s really big theme?
“It’s going to be several research projects. For example, one project we are working on, is about a narrow versus a broad view of sustainability. In a way finance is about sustainability, because the goal of finance is to make companies last as long as possible, to be profitable as long as possible. But it is sustainability in a narrow sort of way. How should finance change, in order to fully become sustainable, not only in a narrow way?”
What is your personal motivation?
“The last few years I felt the urge to do research that translates into impact, or that is a bit more relevant than only doing research on financial markets. Sometimes earlier in my career, I was thinking: I’m not sure who really benefits from my work. I would like to do something more tangible for society.”
Instead of creating information that big companies can use to become bigger?
“Yes. Or instead of yet another question about financial markets in isolation. I think that solutions to world problems are in looking beyond the current boundaries of research fields. It’s an exciting time for researchers. One other motivation: since the financial crisis, you often hear criticism against financial markets and those mathematical models. But that is exactly what I do: mathematical models. My silent goal is to try to show mathematical models can be useful for societal impact.”