TITLE:
Does Speculation Matters for Wheat Price Shocks?
AUTHORS:
Gökhan Çinar, Adnan Hushmat, Ayşe Uzmay
KEYWORDS:
Wheat, Price Shocks, VAR Model, Speculation
JOURNAL NAME:
Theoretical Economics Letters,
Vol.5 No.4,
August
14,
2015
ABSTRACT: The purpose of this
research is to study the relation between wheat price shocks and speculative
movements. VAR model is developed to analyze the data. Impulse-Response functions
and Variance Decomposition method are used to analyze the size of relationship
among the variables. Wheat prices are effected significantly by speculative
movements in the short-run. The relation loses its significance after three
months. The effect of speculation on wheat prices can lead to negative reaction
from the producers; that will be harmful for an economy as a whole. In order to
prevent this, effective use of the government policies is needed; so that, in
the long-run, not only economic but also speculative based price structure can
be achieved. The disclosures of global wheat yield estimated by the authorities
can be a helpful tool in order to control speculative movements and in
achieving long-run market equilibrium. This study encompasses a bigger picture
and provides an opportunity to have a deeper and broader look into the dynamics
of wheat prices. Thus, it can be advantageous for traders as well as for policy
makers.