Price bubbles of agricultural commodities: evidence from China’s futures market

Zhuo Chen (), Bo Yan () and Hanwen Kang ()
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Zhuo Chen: South China University of Technology
Bo Yan: South China University of Technology
Hanwen Kang: Monash University

Empirical Economics, 2023, vol. 64, issue 1, No 8, 195-222

Abstract: Abstract The frequent price volatility in China’s agricultural futures market has aroused concern about price bubbles in the agricultural futures market. This paper analyzes the characteristics of price bubbles in China’s agricultural futures market by using data from nine active agricultural commodities futures and the Nanhua agricultural price index. The empirical results show that only soybean futures, sugar futures, cotton futures, and the Nanhua agricultural price index exist price bubbles. The duration of price bubble accounts for 2.5–6.2% of the whole sample interval. Moreover, combined with China’s agricultural policy, this paper finds that after 2014, China’s policy reform from the “yellow box” policy to the “green box” policy and the “blue box” policy can inhibit price bubbles of agricultural futures market to a certain extent. Additionally, the higher the dependence on the international market, the higher the risk of price bubbles in the agricultural futures market. Besides, agricultural futures are more prone to price bubbles with long duration and large price change during the agricultural crisis (soybean and cotton experienced price bubbles from 2007 to 2008 and 2010 to 2011, respectively). The findings of this paper have important policy implications for policy-makers.

Keywords: Futures markets; Agricultural commodities; Price bubbles; The wild bootstrap (search for similar items in EconPapers)
JEL-codes: C15 D84 G13 Q13 Q18 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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DOI: 10.1007/s00181-022-02254-0

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