Testing for bubbles in agriculture commodity markets

Francisco José Areal; Kevin Balcombe; George Rapsomanikis

doi:10.7201/earn.2016.01.04

Authors

Francisco José Areal University of Reading
Kevin Balcombe University of Reading
George Rapsomanikis Organisation of the United Nations

DOI:

https://doi.org/10.7201/earn.2016.01.04

Keywords:

Generalized SUP augmented Dickey Fuller, food prices, price bubbles.

Abstract

We apply the recent generalized sup augmented Dickey-Fuller (GSADF) test for explosive bubbles (Phillips et al., 2012) to monthly time-series for food, beverages, agricultural raw material, cereals, dairy, meat, oils and sugar indices and a total of 28 agricultural commodities between 1980-2012. We found price bubbles occurred for 6 out of the 10 indices studied and for 6 out of the 28 commodities within food markets. Results from the tests can help implementing policies aimed at mitigating effects of future price bubbles to targeted food commodity markets that may require special attention.

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Author Biographies

Francisco José Areal, University of Reading

School of Agriculture Policy and Development

Kevin Balcombe, University of Reading

School of Agriculture Policy and Development

George Rapsomanikis, Organisation of the United Nations

Trade and Markets Division, Food and Agriculture Organisation of the United Nations, Rome

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