Speculation in Delhi potato wholesale markets, 2007–2019: Causal connections of prices and arrival quantities

Olli Salmensuu and David McMillan

Cogent Economics & Finance, 2020, vol. 8, issue 1, 1821997

Abstract: This work built on financial literature on rolling window Granger-causality testing (RWGCT) methodology, specifically expanding its early theme of speculative trading which emerged in 2009 following the food price crisis. Although many times driving the commodity prices in reality, the unexpected often remains unexplained in equilibrium modelling. Financial speculation is a distinct, unexpected phenomenon which allows us to determine temporal order of affecting market forces in equilibrium dynamics. A logical framework retraces price and quantity adjustment directions from underlying speculative demand or supply curve shifts; using it, we extracted these shifts with RWGCT from the price and arrival quantity data of Delhi potato wholesale markets. The main results confirmed the framework, more speculation was detected on demand side compared to supply side. The food price crises of 2007–2009 and 2011–2012 saw most demand-side speculation, as financial liquidity poured also to potato markets, whereas supply-side speculation was most likely detected due to unexpectedness related to approaching harvest or its aftermath when considerably supply becomes available, and thus also greater potential gains from timing sales.

Date: 2020
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DOI: 10.1080/23322039.2020.1821997

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