Information Transmission under Increasing Political Tension – Evidence for the Berlin Produce Exchange 1887-1896

Martin T. Bohl, Alexander Pütz, Pierre Siklos and Christoph Sulewski

No 7618, CQE Working Papers from Center for Quantitative Economics (CQE), University of Muenster

Abstract: This article studies the effects of increasing political uncertainty on the functioning of futures markets. For this purpose, we utilize a unique natural experiment, namely the discussions around and the final coming into force of the German Exchange Act of 1896. Using static and time-varying vector error correction models, the empirical analysis shows that, although early futures markets exhibit a high degree of operational efficiency, increasing political tensions were related to a declining dominance of the futures market in the price discovery process. In summary, we provide a strong illustration of the negative consequences of misplaced regulatory attempts caused by strong political interests.

Keywords: Early commodity futures markets; Berlin Produce Exchange; Uncertainty; Price discovery; Regulation (search for similar items in EconPapers)
JEL-codes: G14 G28 N23 N44 Q14 Q18 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2018-10
New Economics Papers: this item is included in nep-his, nep-mst and nep-pol
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