Title: Causality nexus between inflation and commodity futures trading in India

Authors: Narinder Pal Singh; Archana Singh

Addresses: Department of Management, Jagan Institute of Management Studies, 3 Institutional Area, Sector 5, Rohini, Delhi 110085, India ' Delhi School of Management, Delhi Technological University, Shahbad Daulatpur, Main Bawana Road, New Delhi, Delhi 110042, India

Abstract: This paper is a novel attempt to fill the research gap by analysing the causal relationship between commodity (argi, metals and energy) futures trading, and commodity specific wholesale price index (WPI) inflation in India. A basket of four commodities chana (chickpea), gold, copper and crude oil has been taken as a proxy for the commodity market. From the results of Toda Yamamoto modified Granger causality test, we infer that there is no causality effect from futures trading volume to WPI inflation for gold, copper and crude oil while chana futures trading is found to be responsible for increase in prices of chana in the spot market. This is a serious matter of concern for the Government of India as India is the world's largest consumer of chana. In a nutshell, we don't find sufficient empirical evidence that commodity futures trading leads to higher inflation.

Keywords: Toda Yamamoto; Granger causality; commodity futures; VAR; stabilisation; inflation; trading volume; India.

DOI: 10.1504/IJICBM.2018.093015

International Journal of Indian Culture and Business Management, 2018 Vol.17 No.1, pp.1 - 15

Received: 30 Mar 2017
Accepted: 09 Oct 2017

Published online: 04 Jul 2018 *

Full-text access for editors Full-text access for subscribers Purchase this article Comment on this article