Does Speculation Matters for Wheat Price Shocks?

DOI: 10.4236/tel.2015.54061   PDF   HTML   XML   3,422 Downloads   4,044 Views   Citations


The purpose of this research is to study the relation between wheat price shocks and speculative movements. VAR model is developed to analyze the data. Impulse-Response functions and Variance Decomposition method are used to analyze the size of relationship among the variables. Wheat prices are effected significantly by speculative movements in the short-run. The relation loses its significance after three months. The effect of speculation on wheat prices can lead to negative reaction from the producers; that will be harmful for an economy as a whole. In order to prevent this, effective use of the government policies is needed; so that, in the long-run, not only economic but also speculative based price structure can be achieved. The disclosures of global wheat yield estimated by the authorities can be a helpful tool in order to control speculative movements and in achieving long-run market equilibrium. This study encompasses a bigger picture and provides an opportunity to have a deeper and broader look into the dynamics of wheat prices. Thus, it can be advantageous for traders as well as for policy makers.

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Çinar, G. , Hushmat, A. and Uzmay, A. (2015) Does Speculation Matters for Wheat Price Shocks?. Theoretical Economics Letters, 5, 522-530. doi: 10.4236/tel.2015.54061.

Conflicts of Interest

The authors declare no conflicts of interest.


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