Working Paper: CEPR ID: DP10441
Authors: Ureo de Paula; Harrison G. Hong; Vishal Singh
Abstract: Hoarding by large speculators is often blamed for contributing to commodity market panics and bubbles. Using supermarket scanner data on US household purchases during the 2008 Rice Bubble, we show that hoarding is in fact more systemic, affecting even households who have no resale motive. Export bans led to a spike in prices worldwide in the first half of 2008, which spilled over into US markets. Anticipating shortages, US households with previous purchases of rice, especially those of Asian ethnicity, nearly doubled their buying around the peak of the bubble. We document transmission mechanisms through over-extrapolation from high prices and contagion, as many households bought rice for the first and last time during the bubble.
Keywords: commodity bubbles; commodity pricing; hoarding; rice
JEL Codes: G00; Q11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| 2008 rice crisis (F69) | Expectations of future prices (D84) |
| 2008 rice crisis (F69) | Actual price increases (E31) |
| Expectations of future prices (D84) | Hoarding behavior among households (D14) |
| Actual price increases during the 2008 rice crisis (Q11) | Hoarding behavior among households (D14) |
| Previous purchases of rice (Q17) | Hoarding behavior among households (D14) |
| Cultural dietary preferences (Z12) | Hoarding behavior among Asian households (D10) |
| Fear of future price hikes (E31) | Hoarding behavior among households (D14) |
| Social influences and media reports (Z13) | Hoarding behavior among households (D14) |