Abstract
This chapter examines whether good markets have political aspects, based on unique data for daily prices in İstanbul between 1918 and 1924. To set a convincing causal estimate for the impacts of political uncertainty on good prices, we focus on political risk changes during this historical episode that was not related to confounding factors, such as economic depression. Our findings shed light on the presence of higher political risk due to the resignations of governments, leading to good price fluctuations through sudden changes in supply and trade disruptions. Based on a natural experiment relating to the end of the Ottoman Empire, our results fill the gap in the literature, which covers limited research on the positive link between political events and fluctuations in commodity market prices.
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Notes
- 1.
Recently, Hanedar et al. (2018) find that the outbreak of many political events from 1918 to 1924 was not related to bond prices at the İstanbul bourse, supporting the independence of such events from the economic conditions.
- 2.
For instance, between 1918 and 1925, the Ottoman newspapers, such as Vakit, had sections of the price ceiling that was imposed by the government. The efficiency of this policy could be related to the government’s power, which could be diminished by the regime changes.
- 3.
- 4.
Under the lack of detailed data, for instance, the articles in the newspapers could reflect outcomes of the economic policies and fluctuations efficiently (Shiller 2017).
- 5.
In the list, it was stated the presence of some penalties in case of failure to comply the prices listed. In addition, there could be a limited flexibility to set prices for some of the goods such as unlisted commodities and coal (Vakit, Azami fiyatlar, 14 June 1922, p. 4).
- 6.
Tasvir-i Efkar (16 December 1918) Gala-yi es’ar, p. 1.
- 7.
Vaki (19 May 1919) Piyasa, p. 2.
- 8.
Tasvir-i Efkar (1 June 1919) Piyasa ahvali, p. 2.
- 9.
Vakit (2 October 1920) Nasıl yaşayabiliyoruz? p. 2; (4 October 1920) Piyasa, p. 3.
- 10.
Tasvir-i Efkar (7 August 1923) Borsada ihtikarın menine doğru, p. 3; (2 September 1923) Borsa komiseri Adli bey’in beyanatı, p. 3; (4 September 1923) Galata borsasında istihale başlıyor, p. 2.
- 11.
Vakit (23 September 1923) İktisadi hafta, p. 3; (6 October 1923) September maaşı, p. 2.
- 12.
Vakit (28 September 1923) Ekmek narhı, p. 3.
- 13.
To compare predicted prices with observed values easily, our paper does not use the logarithmic transformation of the variables.
- 14.
The data are compiled from the Ottoman newspapers, i.e., Vakit and Tasvir-i Efkar.
- 15.
- 16.
The coefficient estimates of interests are robust to the inclusion of GARCH effects, which are not statistically significant.
- 17.
Coefficient estimates are robust to the inclusion of additional control variables, such as the number of good and bad news mentioned by the Ottoman newspapers on the economy. In addition, the value of the Lira could reflect some political events’ impacts on prices (Hanedar et al. 2019). To cope with this issue, we add separate dummy variables for political events examined in our study, which does not make large changes in the coefficients of interest. This also provides evidence supporting the exogeneity of the events.
- 18.
Vakit (16 June 1921) Piyasa, p. 3.
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Acknowledgements
I thank Elmas Yaldız Hanedar, Tunç İnce, and Sezgin Uysal for their helpful comments and materials.
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Hanedar, A.Ö. (2022). Have Commodity Markets Political Nature?. In: Terzioğlu, M.K. (eds) Advances in Econometrics, Operational Research, Data Science and Actuarial Studies. Contributions to Economics. Springer, Cham. https://doi.org/10.1007/978-3-030-85254-2_10
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