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Speculation, climate or pandemic: Who drives the Chinese herbal medicine bubbles?

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  • Qin, Meng
  • Su, Ai-Hsuan
  • Li, Ruifeng
  • Su, Chi-Wei

Abstract

Reducing excessive price fluctuations of Chinese herbal medicines is crucial to the high-quality development of traditional Chinese medicine. The research utilises the relatively advanced Generalized Supremum Augmented Dickey-Fuller (GSADF) methodology to uncover multiple bubbles in the Chinese herbal medicine market, marking a pioneering effort in identifying cyclical boom and bust periods in this sector. Furthermore, we innovatively establish the logit regression system to identify the key factors contributing to these bubbles, representing a significant contribution to the field. The quantitative analyses reveal the following key insights: First, seven bubbles existed in the Chinese herbal medicine market from January 2007 to September 2023, consistent with the bubble theory that assumes the existence of expectation and intangible components in the price formation of Chinese herbal medicines. Second, it could be found that speculation and climate factors would cause irrational prosperity in the Chinese herbal medicine market, whereas the former's effect is larger and more significant than that of the latter. Third, the periodical boom and bust episodes in this market are undriven by the pandemic factor. Against the backdrop of frequent occurrences of Chinese herbal medicine bubbles, these conclusions would put forward valuable recommendations for China to promote the health and stable development of the Chinese herbal medicine market.

Suggested Citation

  • Qin, Meng & Su, Ai-Hsuan & Li, Ruifeng & Su, Chi-Wei, 2024. "Speculation, climate or pandemic: Who drives the Chinese herbal medicine bubbles?," China Economic Review, Elsevier, vol. 87(C).
    • Handle: RePEc:eee:chieco:v:87:y:2024:i:c:s1043951x24001020
    DOI: 10.1016/j.chieco.2024.102213
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    More about this item

    Keywords

    Chinese herbal medicine bubbles; Generalized supremum ADF; Speculation; Climate change; Pandemic;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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