Role of Commodity Futures Market in Spot Price Stabilization, Production and Inventory Decisions with Reference to India
The findings of this paper suggest that the allegation against futures market in India 'that it distorts the spot market price and creates artificial scarcity by allowing unnecessary hoarding', is a misconception. This paper finds out that there is a co-movement among futures price, production decision and the inventory decision. With the assumption that future market is monopolistically competitive, the paper finds that future price elasticity of production always being greater than or equal to one, an increase in profit by increasing price is not possible. Therefore, the doubt about its distorting effect on spot price can be ruled out. The suspicion about the increasing hoarding resulting from futures market can also be proved unjustified from results. Our results show that futures price elasticity of inventory is inversely related with the carrying cost. Therefore, an unnecessary hoarding will increase the carrying cost leading to a lower responsiveness of inventory to futures prices. This paper also finds out the effect of expected production shocks on futures price elasticity of supply.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Volume (Year): 39 (2004)
Issue (Month): 2 (July)
|Contact details of provider:|| Postal: |
Phone: 91-11-2766-6533/34/35, 2766-6703/04/05
Web page: http://www.ierdse.org/Email:
More information through EDIRC
|Order Information:|| Web: http://www.ierdse.org/ Email: |
When requesting a correction, please mention this item's handle: RePEc:dse:indecr:v:39:y:2004:i:2:p:315-325. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Pami Dua)
If references are entirely missing, you can add them using this form.