Developed speculation and underdeveloped markets--the role of futures trading on export prices in less developed countries
This paper examines the relationship between New York coffee futures and cash export prices in Guatemala and Honduras . Cointegration tests suggest that the futures market is serving its price discovery function, and provides a vehicle by which to manage the domestic price risk in export countries. However, further analysis finds that as the percent of speculative open interest increases in the coffee futures market, price volatility increases. This suggests that cash market price risk in exporting countries may actually increase as a result of futures trading activity in developed country futures exchanges.
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Volume (Year): 31 (2004)
Issue (Month): 4 (December)
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- Fortenbery, T. Randall & Zapata, Hector O., 1995.
"An Evaluation of Price Linkages Between Futures and Cash Markets for Cheddar Cheese,"
204126, University of Wisconsin-Madison, Department of Agricultural and Applied Economics, Food System Research Group.
- T. Randall Fortenbery & Hector O. Zapata, 1997. "An evaluation of price linkages between futures and cash markets for cheddar cheese," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 17(3), pages 279-301, 05.
- Massell, Benton F, 1969. "Price Stabilization and Welfare," The Quarterly Journal of Economics, MIT Press, vol. 83(2), pages 284-98, May.
- Nguyen, Duc Tin, 1980. "Partial Price Stabilization and Export Earning Instability," Oxford Economic Papers, Oxford University Press, vol. 32(2), pages 340-52, July.
- Lutkepohl, Helmut & Reimers, Hans-Eggert, 1992. "Impulse response analysis of cointegrated systems," Journal of Economic Dynamics and Control, Elsevier, vol. 16(1), pages 53-78, January.
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