Are grain markets in Niger driven by speculation?
Résumé
Over the last two decades, millet prices in Niger have experienced several periods
of spectacular increases during which they seemed to go well above their fundamental
value. The presence of rational speculative bubbles might explain these episodes
of price booms followed by rapid reversals. Relying on the present value
model of commodity pricing we test for the presence of periodically and partially
collapsing price bubbles for 31 millet markets in Niger by using right-tailed recursive
unit root tests. Once controlled for observed fundamentals, one-third of price series
manifest explosive behaviour akin to a bubble. Under the rational bubble hypothesis,
the results indicate that the traders operating in separate geographic areas differ
with respect to information quality. A competing interpretation is that some large
traders use their market power to charge higher prices to consumers.