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Are grain markets in Niger driven by speculation?

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  • Catherine Araujo Bonjean

    (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I)

  • Catherine Simonet

    (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I)

Abstract

Over the last two decades, millet prices in Niger have enjoyed periods of spectacular increase during which they seem to go well above their fundamental value. These episodes of price bursts followed by rapid reversals could be attributed to the presence of rational speculative bubbles. Considering millet as a food asset we have developed a pricing model, and tested for the presence of periodically and partially collapsing bubbles for 15 millet markets in Niger. The test strategy consists of estimating the fundamental value of millet and investigating the dynamic properties of price deviations from fundamentals. A battery of unit root tests aimed at controlling for skewness and kurtosis, and for non linearity in the bubble process, is implemented. These tests do not reject the presence of rational bubbles for some of the sample markets, and allow the identification of expanding and collapsing phases in bubble processes. The results show that small markets, located in deficit and remote areas are more prone to speculation than large markets in the main producing and consuming regions.

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Paper provided by HAL in its series Working Papers with number halshs-00626409.

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Date of creation: 27 Sep 2012
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Handle: RePEc:hal:wpaper:halshs-00626409

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Keywords: periodically collapsing bubbles; M-TAR; Markov switching ADF; Residual Augmented ADF test; Rolling ADF test; millet;

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  1. John Y. Campbell & Pierre Perron, 1991. "Pitfalls and Opportunities: What Macroeconomists Should Know About Unit Roots," NBER Technical Working Papers 0100, National Bureau of Economic Research, Inc.
  2. van Norden, Simon, 1996. "Regime Switching as a Test for Exchange Rate Bubbles," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(3), pages 219-51, May-June.
  3. Behzad T. Diba & Herschel I. Grossman, 1989. "Rational Bubbles in Stock Prices?," NBER Working Papers 1779, National Bureau of Economic Research, Inc.
  4. van Norden, Simon & Schaller, Huntley, 1993. "The Predictability of Stock Market Regime: Evidence from the Toronto Stock Exchange," The Review of Economics and Statistics, MIT Press, vol. 75(3), pages 505-10, August.
  5. Im, Kyung So & Schmidt, Peter, 2008. "More efficient estimation under non-normality when higher moments do not depend on the regressors, using residual augmented least squares," Journal of Econometrics, Elsevier, vol. 144(1), pages 219-233, May.
  6. James E. Payne & George A. Waters, 2005. "REIT markets: periodically collapsing negative bubbles?," Applied Financial Economics Letters, Taylor and Francis Journals, vol. 1(2), pages 65-69, March.
  7. Charemza, Wojciech W. & Deadman, Derek F., 1995. "Speculative bubbles with stochastic explosive roots: The failure of unit root testing," Journal of Empirical Finance, Elsevier, vol. 2(2), pages 153-163, June.
  8. Waters, George A., 2008. "Unit root testing for bubbles: A resurrection?," Economics Letters, Elsevier, vol. 101(3), pages 279-281, December.
  9. Catherine ARAUJO BONJEAN & Claudio ARAUJO & Stephanie BRUNELIN, 2010. "Alert at Maradi: preventing food crisis using price signals," Working Papers 201023, CERDI.
  10. Bhargava, Alok, 1986. "On the Theory of Testing for Unit Roots in Observed Time Series," Review of Economic Studies, Wiley Blackwell, vol. 53(3), pages 369-84, July.
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