Developed speculation and underdeveloped markets - the role of futures trading on export prices in less developed countries.

摘要

Following an overview of less developed countries' (LDC) use of futures markets, this paper examines the relationships between the New York coffee futures markets and cash markets in two Latin American LDCs (Honduras and Guatemala). The specific objectives are to (i) determine whether the New York futures contract for coffee offers hedging opportunities for Latin American coffee market participants, and (ii) examine the relationship between futures trade composition in New York and the volatility of coffee prices in Latin American cash markets. The first objective is addressed using cointegration analysis, using data for the period March 1990-December 2001. The second objective is tackled using a combination of a regression model and an analysis of the residual behaviour from the cointegration equations, using bi-weekly data for January 1993-December 2001. The results shed light on the potential impact of speculative market activity on futures volatility, and the extent to which futures market volatility corresponds to volatility in LDC cash markets.