2017/04/04 by Mikio Ito, Ito, Mikio, Kiyotaka Maeda +3
Economics, Econometrics and Finance · #FOS: Economics and business #Market Dynamics and Volatility #Pricing of Securities (q-fin.PR) #Statistical Finance (q-fin.ST)
paper · pdf · doi:10.48550/arxiv.1704.00985
openalex publication_date 2017/04/04 · openalex created_date 2021/02/01 · openalex updated_date 2026/07/28
We investigate the relationship between market efficiency of rice futures\ntransaction in Osaka and the Japanese government intervention in rice\ndistributions by directly buying and selling rice during the interwar period,\nfrom the middle 1910s to 1939, considering the context of "discretion versus\nrules." We use a time-varying VAR model to compare market efficiency and the\ngovernment's actions over time. We found the two facts by featuring the\ntime-varying nature of the market efficiency. First, the intervention with\ndiscretionary power disrupted the rice market and reduced market efficiency in\nthe exchange. Second, the market efficiency improved in accordance with\nreduction in the government's discretionary power to operate the rice policy.\nWhen the government obtained the discretionary power to operate the policy\nregarding commodity market, the market efficiency often reduced. Conversely,\neven if the government implemented a large-scale intervention, the market\nefficiency improved when the government chose a systematic rule-like behavior\nfollowing the law.\n