Speculative Price Bubbles in the Rice Market and the 1974 Bangladesh Famine
Abstract
This paper investigates the role played by speculative price bubbles in destabilizing
food markets in Bangladesh during the 1974 famine. The hypothesis of speculative price
bubbles in the rice market is tested using weekly price data. These tests are based
on a theoretical model of storable food markets in which agents exhibit rational expectations.
It is shown that such markets are susceptible to destabilizing trends by self-fulfilling
expectations. While "explosive price bubbles" have received extensive attention in
macroeconomics, they have not been used in development economics to explain famines.
Amartya Sen has hypothesized that speculative forces are a possible source of instability
in the food market. Our empirical tests based on techniques from the recent literature
on price bubbles lend some credence to the hypothesis that excessive speculation may
have produced price bubbles in the rice market which directly contributed to the Bangladesh
famine in 1974.
Type
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https://hdl.handle.net/10161/7462Collections
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Show full item recordScholars@Duke
Charles Maxwell Becker
Research Professor of Economics
Charles Becker is interested in exploring the economies of such countries as Kazakhstan,
India, sub-Saharan Africa, Russia, and Kyrgyzstan. His research has focused on economic
demography, social security system forecasting, CGE modeling, mortality and disability
risk, determinants of health care utilization, computable general equilibrium simulation
modeling, and urban economics. His on-going projects involve assessing infant mortality
rates, poverty in developing countries, accidental deaths

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