CHINESE ACADEMY OF INTERNATIONAL TRADE
AND ECONOMIC COOPERATION
MINISTRY OF COMMERCE, P. R. CHINA

Wed.29/10/2014

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Lin Xuegui,

Abstract: Sharp fluctuation ofsoybean prices in international and domestic markets has caused big risks forboth domestic soybean producers and processing enterprises in recent years. Italso increased the difficulties in implementing price stabilization policy forthe government. This paper analyzes the volatility spillovers in soybean pricesbetween international and domestic markets using multivariate VAR-BEKK-GARCHmodel based on the data set from the December 22, 2004 to December 19, 2014.The estimate results indicate that there are volatility spillover effects fromdomestic futures market to spot market and bidirectional spillovers betweeninternational futures market and domestic spot market.  In order to prevent market manipulation andto reduce the impacts of price volatility in international soybean market onChinese market, the author proposed the following policy measures such asestablishing early warning mechanism for soybean price fluctuations, improvingsoybean futures contract design and strengthening trading risk managementmechanism, amplifying information disclosure system, regularizing speculationactivities of big traders.

(Fellow, Chinese Academy of InternationalTrade and Economic Cooperation of MOC, Beijing100710)