An analysis of short-run price instability of cotton Hank Yarn

Abstract

This article shows that the lower counts cotton hank yarn, which are used to produce lower quality segment of handloom cloth, are subject to higher short-run price instability than the higher counts hank yarn which are used to produce higher quality handloom cloth. We argue that one of the dominant reasons for the higher price instability of lower counts hank yarn is that the spinning mill sector treats the production of these counts as a residual activity. This, in turn, leads to erratic supply adjustment and high price instability,