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Commodity Price Bubbles and Macroeconomics: Evidence from Chinese Agricultural Markets

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  • Li, Jian
  • Chavas, Jean-Paul
  • Etienne, Xiaoli
  • Li, Chongguang

Abstract

This paper investigates the linkages between commodity price bubbles and macroeconomic factors, with an application to agricultural commodity markets in China from 2006 to 2014. Price bubbles are identified using a newly-developed recursive right-tailed unit root test. A Zero-inflated Poisson Model is used to analyze the factors contributing to bubbles. Results show that a) there were speculative bubbles in most of the Chinese agricultural commodities during the sample period, though their presences are rather infrequent; b) economic growth, money supply and inflation have positive effects on bubble occurrences, while interest rate has a negative effect; c) among all macroeconomic factors considered, economic growth and money supply have the greatest effects on bubble occurrences. Our findings shed new light on the nature and formation of bubble behavior in the Chinese agricultural commodity markets.

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  • Li, Jian & Chavas, Jean-Paul & Etienne, Xiaoli & Li, Chongguang, 2016. "Commodity Price Bubbles and Macroeconomics: Evidence from Chinese Agricultural Markets," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235068, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea16:235068
    DOI: 10.22004/ag.econ.235068
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    Cited by:

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    3. Fatima, Hira & Ahmed, Mumtaz, 2019. "Testing for Exuberance Behavior in Agricultural Commodities of Pakistan," MPRA Paper 95304, University Library of Munich, Germany.
    4. Zhuo Chen & Bo Yan & Hanwen Kang, 2023. "Price bubbles of agricultural commodities: evidence from China’s futures market," Empirical Economics, Springer, vol. 64(1), pages 195-222, January.
    5. Ye Chen & Jian Li & Qiyuan Li, 2023. "Seemingly Unrelated Regression Estimation for VAR Models with Explosive Roots," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 85(4), pages 910-937, August.
    6. Yujie Chen & Jiangwei Tang, 2024. "Will the financialisation of agricultural products exacerbate food security risks? Empirical analysis from major grain-producing countries worldwide," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 70(4), pages 178-186.
    7. Fang, Ming & Lin, Yizhou & Chang, Chiu-Lan, 2023. "Positive and negative price bubbles of Chinese agricultural commodity futures," Economic Analysis and Policy, Elsevier, vol. 78(C), pages 456-471.
    8. Chavas, Jean-Paul & Li, Jian & Wang, Linjie, 2024. "Option pricing revisited: The role of price volatility and dynamics," Journal of Commodity Markets, Elsevier, vol. 33(C).
    9. Zhang, Youwang & Li, Chogguang & Xu, Yuanyuan & Li, Jian, 2020. "An attribution analysis of soybean price volatility in China: global market connectedness or energy market transmission?," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 22(1), July.
    10. Jian Li & Jean‐Paul Chavas, 2023. "A dynamic analysis of the distribution of commodity futures and spot prices," American Journal of Agricultural Economics, John Wiley & Sons, vol. 105(1), pages 122-143, January.
    11. El Montasser, Ghassen & Malek Belhoula, Mohamed & Charfeddine, Lanouar, 2023. "Co-explosivity versus leading effects: Evidence from crude oil and agricultural commodities," Resources Policy, Elsevier, vol. 81(C).
    12. Jiawu Dai & Liurui Deng & Lan Yang, 2021. "Testing the absorber hypothesis of exchange rates for the overshooting of agricultural prices in China," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 67(8), pages 327-336.
    13. Jean‐Paul Chavas & Jian Li, 2020. "A quantile autoregression analysis of price volatility in agricultural markets," Agricultural Economics, International Association of Agricultural Economists, vol. 51(2), pages 273-289, March.
    14. Chavas, Jean-Paul & Li, Jian & Wang, Linjie, 2024. "Option Pricing Revisited: The Role of Price Volatility and Dynamics," 2024 Annual Meeting, July 28-30, New Orleans, LA 343544, Agricultural and Applied Economics Association.
    15. Makkonen, Adam & Vallström, Daniel & Uddin, Gazi Salah & Rahman, Md Lutfur & Haddad, Michel Ferreira Cardia, 2021. "The effect of temperature anomaly and macroeconomic fundamentals on agricultural commodity futures returns," Energy Economics, Elsevier, vol. 100(C).
    16. Fan, John Hua & Mo, Di & Zhang, Tingxi, 2022. "The “necessary evil” in Chinese commodity markets," Journal of Commodity Markets, Elsevier, vol. 25(C).
    17. Dariusz Kusz & Bożena Kusz & Paweł Hydzik, 2022. "Changes in the Price of Food and Agricultural Raw Materials in Poland in the Context of the European Union Accession," Sustainability, MDPI, vol. 14(8), pages 1-21, April.
    18. Irwin, Scott H., 2020. "Trilogy for troubleshooting convergence: Manipulation, structural imbalance, and storage rates," Journal of Commodity Markets, Elsevier, vol. 17(C).

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    Demand and Price Analysis; Risk and Uncertainty;

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