Information transmission under increasing political tensions-Evidence from the Berlin Produce Exchange 1887-1896

摘要

This article studies the effects of increasing political uncertainty on the functioning of German futures markets. We examine a unique event, namely the discussions around and the final coming into force of the German Exchange Act of 1896. Using static and time-varying vector error correction models, the empirical analysis shows that, although early futures markets exhibit a high degree of operational efficiency, increasing political tensions were related to a declining dominance of the futures market in the price discovery process. In summary, we provide a strong illustration of the negative consequences of misplaced regulatory attempts stemming from powerful political interests.