s p 500 cash stock price volatilities s p 500 stock return volatilities are compared to the volatilities of a matched set of stocks after controlling for cross sectional differences in firm attributes known to affect volatility no significant difference in volatility is observed between 1975 and 1983before the start of trade in index futures and index options since then s p 500 stocks have been relatively more volatile the difference is statistically but not economically significant the relative increase occurs primarily in daily returns and only to a lesser extent in longer interval returns other factors besides the start of derivative trade could be responsible for the small increase in volatility stock price volatility has received much attention in the popular press over the last few years especially since the october 19 1987 stock market crash the rise in volatility has alarmed investors regulators and the public in general some suggest that the start of trade in stock index futures and index options increased speculative activity that in turn destabilized cash markets causing higher volatility large trading activity in the derivative contracts makes the suggestion plausible volume in index futures and index options increased dramatically since their introductions in 1982 and 1983 by 1987 the average daily dollar volume in the s p 500 futures contracts alone exceeded the dollar volume of cash s p 500 trade by a factor of about two while the dollar value of the daily net change in total open interest is about 8 of s p 500 stock dollar volume speculative trade in futures and options frequently is accused of destabilizing underlying cash markets the charge has been made for more than a century in the agricultural precious metal and currency markets recent evidence by french and roll 1986 showing stock variance to be strongly related to trading session hours heightens these concerns unfortunately theoretical analyses of whether speculative trade destabilizes cash markets lead to conflicting conclusions depending on what assumptions are made 1 school of business administration university of southern california and office of economic analysis u s securities and exchange commission i wish to thank mary denny mcsweeny and steve hornstein for their valuable research assistance and the referee and editor for their many suggestions and insights the opinions expressed in this paper do not necessarily reflect those of the u s securities and exchange commission or those of the author s colleagues on its staff an increase in well informed speculative trade has two opposite effects on measured volatility it decreases volatility due to order flow imbalances caused by uninformed traders because informed traders provide liquidity in such events and it increases volatility due to new fundamental information since the information which is assumed to be generated at discrete time intervals is impounded into

risk aversion and the recommended hedging ratio in a recent article in this journal kahl reviewed the existing literature on the determination of optimal futures and cash market positions the optimal hedging ratios were found to depend on whether the cash position was treated as endogenous or predetermined and some general implications were set forth the surprising conclusion was that the optimal hedging ratio is independent of the individual s risk aversion even though the optimal positions in the cash and futures markets are themselves not independent of the risk parameter kahl demonstrates that this conclusion

dynamic perspectives on agricultural policy issues among the innovators fred waugh was one of the most prolific he made pioneering contributions in linear programming statistics and econometrics demand analysis the welfare effects of price risk and the analysis and explanation of commodity cycles as a research leader mentor and teacher at the usda he left his mark on the work of later generations of researchers i find myself no exception as will become clear from what i have to say in this paper even though i never met him in person my work has been influenced by what he wrote and by what his students wrote and taught among the many topics that interested waugh were the dynamics of free market behavior and the implications for policy formation in this paper i consider models of markets in which the dynamics run in two directions forward from current conditions to expectations of future prices and back from price expectations to current decisions both types of linkages can be crucial in competitive models of agricultural production in which land has a prominent role as the quintessential fixed asset a central challenge of market analysis from waugh s time till now has been to infer from market observations whether markets are behav

an analysis of technological change factor substitution and economies of scale in manufacturing industries in india the biases of technological change factor substitution and economies of scale in four major manufacturing industries viz cement electricity and gas cotton textiles and iron and steel in india are examined the translog cost functions are estimated using annual time series data covering the period 1960 61 to 1982 83 the study reveals that technical change has been biased towards the use of labour and materials and against the use of capital and energy in electricity and gas industries in cotton textiles the technological change has shown the opposity biases significant economies of sclae exist in the production of electricity and gas enough evidence of substitution possibilities among factors of production in all the four industries was also found

analyzing the indirect production function for u s manufacturing in recent years there has been considerable research conducted in applied production economics to estimate the firm s structure of technology and its production characteristics the main concept used in this research is the duality principle relating production and cost or profit together with the use of flexible form econometric specifications for estimating production technologies under the assumption of cost minimization or proft maximization duality implies that for any production function there exists a cost or profit function that provides an equivalent description of the technology what is less well known however is that the firm s technology can be equally well described by the indirect production function a production analog of the indirect utility function in consumer theory 5 8 9 the indirect production function is based on the firm s output maximization subject to a budget constraint on input costs of course it is evident enough that a firm choosing inputs to maximize output for a given input cost produces that output at the minimum cost by implication the indirect production and cost functions are equivalent ways of characterizing the firm s technology and as will be seen there exists a unique correspondence between the two functions in empirical application however the choice between the two functions hinges on the exogeneity or endogeneity of output for the indirect production function the level of output is an endogenous variable in the case of the cost function on the other hand output is exogenously given in most situations it is the indirect production function not the cost function that is more compatible with observed behavior of firms and industries while numerous studies have been conducted recently to estimate the cost or profit function in a variety of firms and industries 1 2 3 6 no attempts have been made to employ the indirect production function as a working tool in applied production analysis this paper attempts to provide empirical evidence from analyzing the indirect production function within the context of an application of the duality principle using the well known data set utilized by berndt and wood 3 and berndt and khaled 2 it reexamines the production structure of u s manufacturing based on a translog specification of the indirect production function for the underlying technology an important question is how the choice of a model the indirect production or cost function

on the accuracy of the mean variance approximation for futures markets abstract simple approximate fomulae for the volume and gains from futures trading are derived using the mean variance model the errors involved are exactly quantified and shown to be negligible for the futures price and welfare gains though potentially larger for volumes

spot and futures prices of nonstorable commodities under rational expectations the paper examines the effect of the presence of a commodity futures market upon the price formation process in a stochastic rational expectations framework an optimizing model with price uncertainty and risk aversion is used in order to solve equilibrium distributions of prices for nonstorable commodities the existence of futures trading does not affect the degree of short term spot price fluctuations however if the commodity market disturbance that originates from stochastic consumption demand is serially dependent then the long term price variation is smaller with a futures market than without it futures prices fluctuate less variably over time than spot and expected prices finally there exists a futures intervention rule whereby the authority can stabilize spot prices and raise the overall welfare of society

returns to scale in a highly regulated economy evidence from indian firms abstract this paper examines returns to scale for a panel of indian manufacturing firms from 1976 1985 a period in which government regulations restricted firms expansion observers have argued that these regulations led to unexploited scale economies in indian firms and our estimates lend limited support to this view although a large number of firms produce below the minimum efficient scale average returns to scale for the various industries are not significantly different from one our estimates suggest that recent deregulation will not generate significant gains in scale efficiency unless expansion is heavily biased towards growth in the smaller firms

financial intermediation and endogenous growth an endogenous growth model with multiple assets is developed agents who face random future liquidity needs accumulate capital and a liquid but unproductive asset the effects of introducing financial intermediation into this environment are considered conditions are provided under which the introduction of intermediaries shifts the composition of savings toward capital causing intermediation to be growth promoting in addition intermediaries generally reduce socially unnecessary capital liquidation again tending to promote growth

the elasticity of substitution in india s manufacturing sector abstract using cross section data and the translog cost function this paper examines the substitution possibilities between capital and materials and labor and materials since raw materials might be used to overcome the bottlenecks caused by shortages of physical capital and skilled labor three significant conclusions are a since materials are substitutable for both capital and labor to a considerable extent capital and skilled labor may not be a binding constraint on growth agricultural materials expansion may substitute for these inputs and lead to expansion in the industrial sector b fixed proportion models are not warranted in india without modification and c separability tests showed that materials must be included in the production function

the value of ideal contingency markets in agriculture an incomplete markets equilibrium in which no contingency markets are available is compared to a complete markets equilibrium formed by introducing a futures market and a crop insurance market the two regimes are compared using comparative static and welfare analyses numerical examples highlight important characteristics of the model and illustrate how the effects of introducing contingency markets can be quantified the main conclusions are that contingency markets in agriculture increase economic efficiency but there is no guarantee that farmers and consumers both benefit it is found that futures and crop insurance markets may reduce farmer welfare when the demand for farm products is price inelastic

do futures benefit farmers simulations are used to analyze welfare and market and farm level effects of making futures available to producers of a storable commodity key features of the model are the explicit consideration of dynamic impacts due to inventories and of aggregate market effects associated with futures adoption by some producers application to the natural rubber market shows that futures availability can lead to sizeable market and farm level effects futures availability enhances consumer welfare reduces non adopter welfare and yields important welfare gains for adopters when their market share is small and welfare losses when they account for a sufficiently large market share

risk the financial market and macroeconomic equilibrium growing recognition of the importance of stock market phenomena to the real economy underscores the need for models linking exogenous uncertainty asset market performance and the rest of the economy in an optimizing framework without certainty equivalence this paper constructs a three agent model with continuous time stochastic variables uncertain private production and government expenditure and forward looking rational agents the growth rate of output physical capital accumulation financial asset returns and uncertain inflation are determined as functions of the exogenous uncertainty in the economy analysis of the model finds that increased risk associated with government policy often reverses in an explainable way the conventional comparative static predictions of nonstochastic macro models

economies of scale for various types of manufacturing production technologies in an underdeveloped economy manufacturing sector 2 all these studies suffer from at least three weaknesses first almost all of them have used either the cobbdouglas or the constant elasticity of substitution ces production functions which are highly restrictive second many have used time series analysis without proper attention to time lags and the problems of multicollinearity also they have neglected to separate fully the effects of technological changes on cost from those of the economies of scale third they have invariably assumed labor and capital to be the main factors of production raw materials inputs which are a considerable element of the total cost of production and could therefore cause significant changes in the estimated elasticities of substitution and consequently in the estimates of returns to scale have been ignored altogether 3 the purpose of this paper is to overcome all these weaknesses by using a flexible functional form and simultaneously to estimate returns to scale and elasticities of substitution specifically we use the transcendental logarithmic cost function introduced by christensen jorgenson and lau4 to estimate the measured characteristics of technology for india s manufacturing industries for purposes of comparison we also focus on various specifications of the production technology we describe all functions in terms of a translog specification and distinguish other technologies with appropriate parametric restrictions

unemployment equilibria and input prices theory and evidence from the united states the paper develops an efficiency wage model where input prices affect the equlibrium rate of unemployment we show that a simple framework based on only two prices the real price of oil and the real rate of interest is able to explain the main post war movements in the rate of u s joblessnss the equations do well in forecasting unemployment many out of sample and provide evidence that the oil price spike associated with iraq s invasion of kuweit appears to be a component of the mystery recession which followed

risk futures pricing and the organization of production in commodity markets this paper examines equilibrium in a spot and futures market with both primary producers growers and intermediate producers processors for a commodity that is subject to output shocks processors tend to hedge long in contrast with hick s theory of futures hedging nevertheless if transaction costs are low the two stage production process brings about a downward futures price bias consistent with hick s pricing prediction but if costs of trading futures are high growers tend to be differentially driven from the futures market reversing the direction of the bias futures trading may also affect the organization of industry when demand is inelastic futures trading can serve as a substitute for vertical integration as a means of diversifying risk because the risk positions of growers are complementary with those of processors

the determination of spot and futures prices with storable commodities this paper analyzes the effects of futures trading in a market for a storable commodity in which producers and speculators are assumed to be risk averse and specifications of the aggregate supply and inventory demand functions are derived from explicit optimization a critical aspect is how the parameters of these functions change with the introduction of the future market as it is through these induced parameter changes that the futures market exerts its influence on the spot price the effects of the futures market on both the long run average spot price and its variance are analyzed while we are unable to draw any definitive conclusions on this issue we find that in all cases considered the futures market stabilizes the spot price as well as lowering its long run mean for many years now the question of the effects of futures trading on the stability of spot prices has been extensively debated this topic has been discussed at various levels for example farmers and agricultural interest groups have claimed that futures trading destabilizes spot prices thereby imposing welfare losses on the economy in the united states congress has decided that futures trading can cause price destabilization and has subjected futures trading to the regulation of the commodity futures trading commission at a more analytical level economists have been investigating the issue both empirically and more recently theoretically as well

intraday relationships between volatility in s p 500 futures prices and volatility in the s p 500 index abstract this paper examines the intraday relationships between the volatility of s p 500 futures prices and the volatility of the s p 500 index we calculate variance measures for minute to minute price changes on a daily basis and across 30 minute intervals the empirical results indicate that i futures volatility is greater than index volatility ii volatility increased for both futures prices and the index in absolute terms from 1984 through 1986 iii both futures and index volatility increased directly with futures trading volume and iv index volatility was systematically greater during the first 30 minutes of trading each day than at other times granger tests however reveal no systematic pattern of futures volatility leading index volatility or index volatility leading futures volatility

policy reform and labour demand in branches of sri lankan manufacturing industry many policy reforms in developing countries aim to remove factor market distortions whether such reforms reduce unemployment depends partly on the substitution possibilities between labour and other factors of production this paper examines labour demand in seven branches of sri lankan manufacturing industry using data on 4 digit industrial categories over the 1990 to 1997 period the box cox transformation is used to allow for flexible and data dependent elasticities the elasticity of capital labour substitution varies widely across the branches of industry and is usually variable rather than constant the average long run own wage elasticity of labour demand for the manufacturing sector is estimated as 0 80 so factor price policy should have an important effect on labour demand in this setting

speculative intensity and spot and futures price variability this paper develops a simultaneous stochastic rational expectations model of futures and spot price determination using the model we find that increases in what we term speculative intensity increase spot price variability arising from storage cost shocks but decrease spot price variability arising from demand shocks in contrast increases in speculative intensity unambiguously decrease futures price variability regardless of the underlying source of disturbances we are able to develop these comparative static results because the model has a unique equilibrium

environment friendly behaviour and competitiveness a study of pulp and paper industry in india this paper seeks to examine the relationship between competitiveness and environment friendly behaviour of producers under an economic liberalisation regime for that purpose it employs a probit model and estimates the influence of the prime movers of industrial growth such as technical change and economies of scale on environmental degradation the empirical results of the study of pulp and paper industry identified as one of the most polluting industries in india indicate that these variables as the key players of competitiveness improvement have positive influence on environment friendly behaviour such findings therefore fail to provide support to a view that articulates ruthless exploitation of the environment under economic liberalisation programme

testing for granger s full causality a procedure is proposed to test for the existence of a fully causal relationship between two variables the method involves contrasting the probabilistic forecasting performance of a univariate and bivariate specification for the same variable y if there exists some theory or belief that x causes y and the addition of a variable x to the information set of a prequential forecasting system for a variable y reduces miscalibration and or the level of forecast uncertainty with respect y s distribution for the next period then a fully causal effect running from x to y may be inferred vector autoregression allows testing for feedback the method is to be applied to the issue of causality between the live cattle futures market and a major slaughter cattle cash market copyright 1992 by mit press

speculative commodity holdings abstract adopting a mean variance approach we characterize the optimal commodity holdings for a risk averse speculator within a discrete time framework a new factor namely covariance risk effect arises which essentially represents the difference between the optimal stock of a risk averse speculator and that of a risk neutral one

a rational expectations model of time varying risk premia in commodities futures markets theory and evidence the intertemporal hedging theory is used to model the role of spot price risk measured by the variance in futures market risk premia the model gives a theoretical basis for treating the variance as serially correlated when commodities are storable t he rational expectations hypothesis implies that agents use the varianc e process to predict risk therefore the expected variance should be incorporated in equilibrium risk premia tests on data from four commodity markets show that variances do have predictable components however premia are related to expected variances in only one market copyright 1993 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

an analysis of the stabilizing and welfare effects of intervention in spot and futures markets this paper analyzes the effects of three alternative rules on the long run distributions of both the spot and futures prices ina single commodity market in which the key behavioral relationships are derived from the optimizing behavior of producers and speculators the rules considered include i leaning against the wind in the spot market ii utility maximizing speculative behavior by the stabilization authority in the futures market iii leaning against the wind in the futures market since the underlying model is sufficiently complex to preclude analytical solutions the analysis makes extensive use of simulation methods as a general proposition we find that intervention in the futures market is not as effective in stabilizing either the spot price of the futures price as is intervention in the spot market indeed rule iii while stabilizing the futures price may actually destabilize the spot price furthermore the analogous type of rule undertaken in the spot market will always stabilize the futures price to a greater degree than it does the spot price the welfare implications of these rules are also discussed our analysis shows how these can generate rather different distributions of welfare gains including the overall benefits this abstract was borrowed from another version of this item

the role of shocks and institutions in the rise of european unemployment the aggregate evidence two key facts about european unemployment must be explained the rise in unemployment since the 1960s and the heterogeneity of individual country experiences while adverse shocks can potentially explain much of the rise in unemployment there is insufficient heterogeneity in these shocks to explain cross country differences alternatively while explanations focusing on labour market institutions explain current heterogeneity well many of these institutions pre date the rise in unemployment based on a panel of institutions and shocks for 20 oecd nations since 1960 we find that the interaction between shocks and institutions is crucial to explaining both stylised facts

the effect of futures markets and corners on storage and spot price variability when a futures market is introduced the volume of storage should become more sensitive to changes in the return to storage the increase in storage sensitivity means that storage will absorb a larger proportion of demand and supply shocks than it did previously reducing spot price volatility data from the chicago board of trade support the hypotheses of increased storage sensitivity and reduced spot price volatility the effect of futures on spot price volatility is sensitive to the competitive structure of the futures market futures market manipulation causes spot price variance to increase despite manipulation the development of the wheat futures market caused the coefficient of variation of spot price to decline significantly

hedging price risks of farmers by commodity boards a simulation applied to the indian natural rubber market abstract this paper investigates a hypothetical hedging scheme in a domestic commodity market under which a commodity board offers a forward contract to domestic producers and local traders and covers its commitments on an international futures exchange it is aimed to quantify welfare gains to agents in the market and costs and benefits of the board empirically the empirical work is based on the indian natural rubber market and the tokyo commodity exchange tocom for the period 1990 95 the hedging scheme is shown to increase welfare substantially particularly welfare of growers the costs of such a facility for the commodity board basis risk are negligible if the forward price offered on the domestic market is a small fraction below the international futures price the board can prevent losses at only slightly lower welfare gains

derivative securities and cash market stability this study investigates the effect of introducing interest rate futures and options on the price variances in related financial cash markets standard research approaches to this issue relate cash price stability before the introduction of futures and options trading to cash price stability after trading in the derivative security begins however controlling for the additional factors that may also effect cash markets is difficult the approach employed here to deal with this obstacle is motivated by recent theoretical research relating cash and futures markets but hitherto not operationalized to empirically test for a relationship between the markets varying parameter models of 1 the demand for short term treasury securities 2 the demand for large time deposits and 3 the supply of large time deposits are specified such that changes in the parameters imply changes in the volatility of the cash price these parameters are modelled as functions of the trading volume of interest rate futures and o

a privately revealing rational expectations equilibrium for the futures market abstract this paper develops a model of the futures market with two types of participants farmers and speculators farmers undertake production decisions and face both output and spot price risk as opposed to speculators who face only spot price risk agents have constant absolute risk aversion von neumann morgenstern utility functions and form rational expectations about the future output shock and spot price we assume that traders specialize in information collection in our model the futures price is not a sufficient statistic for the market information we show that the rational expectations equilibrium ree futures price is privately revealing to traders who purchase costly information this ree is efficient in the sense that in equilibrium traders are in possession of all market information we demonstrate that traders a have an incentive to collect costly information and b are better off by specializing in collecting the information in which they have a comparative advantage in terms of the quality of the information that they can obtain finally we show that the futures market stabilizes the spot price

real effects of futures speculation asymptotically rational expectations to what extent does the diversity in the forecasting ability of futures speculators simply result in transfers of wealth among themselves and to what extent does it affect the allocation of resources on the basis of bayesian analysis it is assumed that the variance of forecast errors between the subjective and objective expectations of the subsequent price differs among groups two major conclusions are as follows 1 if given our parameter estimates the forecast error variance of the amateur speculators is less than six times that of the professionals then the existence of futures markets will lower the expected price to consumers increase expected output and lower the variance of the price 2 since small speculators lose to the professionals the relative variance of the forecast error of the amateurs to the professionals exceeds their relative weights as measured by the ratio of numbers to average risk aversion

an econometric estimation of hicksian and marshallian elasticities in indian manufacturing the knowledge of substitution possibilities between different factors of production is essential in evaluating the impact of public policies on productivity employment industrial growth and factor intensity since the advent of flexible functional forms in the early 1970s a large number of studies have estimated the ease of factor substitution however to date most of the empirical evidence on factor substitution is based on a cost function a drawback with the cost function

global unemployment shocks in this paper we use oecd unemployment data 1960 2002 to infer the nature of shocks to unemployment using factor analysis we find that two principal components can account for a large part of the variance of unemployment between and within countries

seasonal patterns of futures hedging and the resolution of output uncertainty abstract optimal futures hedging is examined in a two good model with stochastic output and sequential information arrival a producer s optimal hedge depends on demand elasticity sensitivity of his output to weather his correlation with aggregate output and how rapidly his output uncertainty is resolved relative to other producers during different seasonal periods because regional output uncertainties are resolved at different times the optimal futures position of a grower will commonly reverse in direction during the crop year a producer with non stochastic output who faces price risk arising from demand shocks may remain unhedged or even maintain a long position

an estimate of the textile and clothing sector production function for selected countries in the early 1970s abstract this paper describes the results of the estimation of sector wide production functions for textiles and clothing for nine industrialized and five industrializing countries in the early 1970s special attention is paid to relative differences between countries especially with respect to the changing role and productivity of labor although somewhat primitive in nature the results suggest that this is a fruitful way to gain a better understanding of the changing international division of labor at the sector level

a note on futures markets with small price and production risks when the spot price and production risk are jointly normally distributed the mean variance approach has little theoretical justification the authors use taylor approximations instead and show the three results one farmers hedge less than expected production when the futures price is less than or equal to the expected spot price two when the futures price equals the expected spot price farmers facing production risk produce less than those without production risk three normal backwardation contango prevails in the markets when correlation between the spot price and production risk is smaller greater in absolute value than the ratio of coefficients of variation of these variables copyright 1992 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

extent and possible causes of intrayear agricultural commodity price volatility wheat corn rice soybeans and cotton experienced higher volatility in the second half of the 2000s for the sample at hand the unit root tests only validate a new period of high volatility for wheat and cotton if in the next couple of years however corn rice and soybeans maintain their higher volatility a new period of high volatility may also be validated statistically regarding the factors driving the intrayear volatility gmm estimates show that commodity market fundamentals i e the stock to use ratio and to a lesser extent the degree of internationalization are the most systematically statistically significant coefficients among commodities over time consecutive low stock to use ratios and a thin international market provoke typically high volatility speculative activity and liquidity in the agricultural derivative market have a stabilizing effect on the spot price if any finally common macro factors significantly impact volatility especially the volatility of petrol and of exchange rates their dispersion importance over the sample is quite sizeable however it is difficult to establish a link between on the one hand loose monetary policy business cycle and inflation and on the other hand commodity price volatility as the sign of the estimated coefficient changes depending on the commodity and the estimated elasticities are quite low

determinants of pollution abatement in developing countries evidence from south and southeast asia abstract developing countries pa ticularly those in asia are fast adopting industrial pollution control standards similar to those in developed countries formal regulation has been greatly hampered however by the absence of clear and legally binding regulations limited institutional capacity lack of appropriate equipment and trained personnel and inadequate information on emissions one would predict highly pollution intensive production under such conditions our research however has uncovered strongly contradictory evidence despite weak or nonexistent formal regulation there are many clean plants in the developing countries of south and southeast asia of course there are also many plants which are among the world s most serious polluters what explains such extreme interplant variation this paper reviews evidence drawn from three empirical studies of plant level abatement practices conducted 1992 1994 the analyses test the importance of plant characteristics economic considerations and external pressure in determining environmental performance the results consistently show that pollution intensity is negatively associated with scale productive efficiency and the use of new process technology it is strongly and positively associated with public ownership but foreign ownership has no significant effect once other plant characteristics are taken into account among external sources of pressure community action or informal regulation emerges as a clear source of interplant differences in all three studies the results suggest that local income and education are powerful predictors of the effectiveness of informal regulation they also show that existing formal regulation has measurably beneficial effects even when it is quite weakly developed

growth wealth and the natural rate is europe s jobs crisis a growth crisis abstract the effect of faster technical progress is studied in our labour turnover model of the natual rate of unemployment in its closed economy version the model implies that in the limit as the steady growth rate is approached the increase in the rate of progress is neutral for the natural unemployment rate its effects are completely offset by the equal increase in the rate of interest it induces however of two small open economies having the same technology level at some date the one where technical progress has always been and always will be faster will have the lower wealth relative to its wage and a lower wage rate relative to future wage rates both effects operate to reduce the natural rate of unemployment whether this theory based hypothesis will be confirmed empirically is a question needing extensive study but a quick comparison of the g7 countries confirms that the proportionate increase of the unemployment rate in recent decades tended to be greater the more pronounced the productivity slowdown

constant utility paths and irreversible global warming this paper shows that the hartwick rule for sustainable utility with depletable resources still applies to the case of the greenhouse effect from fossil fuel carbon emissions although a carbon tax is necessary for sustainable utility it is sufficient that the sum of net energy rents and carbon tax revenues is invested in reproducible capital examination of recent savings rates and energy cost shares suggests that this may be difficult to achieve with current global savings rates jel classification q32

understanding technological progress and input price as drivers of energy demand in manufacturing industries in india abstract this paper presents a comprehensive analysis of energy demand behaviour of seven energy intensive manufacturing industries and the aggregate manufacturing sector in india during 1973 74 to 2011 12 the policy perform achieve and trade pat has mandated energy efficiency targets for these manufacturing industries in india we focus on two major drivers of energy demand technological progress and energy price productivity growth accounting and estimation of parametric cost function using annual survey of industry data bring out important implications regarding the role of these two drivers results suggest that these industries experienced technological progress over the study period 1973 74 to 2011 12 with significant energy saving bias during 1998 99 to 2011 12 increase in energy price has led to reduction in energy demand and augmented technological progress in most of the industries energy and material inputs are mostly substitutes during 1998 99 to 2011 12 productivity growth of energy input was induced by both technological progress and increase in energy price estimates of inter factor substitution suggest that price induced reduction in energy demand can be a capital intensive process in case of some industries rebound effect has never taken back full gains of energy efficiency policies in the context of these industries

the working curve and commodity storage under backwardation there remains controversy over whether the empirical curve relating intertemporal commodity price spreads and stocks originally drawn by holbrook working in 1933 i e the working curve is a valid stylized fact in commodity markets the core of the controversy is the portion of the curve representing commodity stocks under backwardation in this article we analyze the original data used by working plus more disaggregated numbers we find that the working curve is indeed valid the diversity of stockholders and different stockholding motives most likely explain the empirical working curve relationship

cost efficiency in bangladesh banking does financial reform matter abstractthis article estimates the cost efficiency of the commercial banks of bangladesh in the context of financial reform employing the single stage stochastic frontier analysis sfa model the study uses a unique balanced panel data set comprising bank level annual data from the dominant commercial banks in bangladesh for the period 1983 2012 the results show that bank cost has fallen due to financial deregulation our results from the data envelopment analysis do not vary significantly that we obtained from the sfa in addition the presence of politically linked directors on the bank board has an adverse effect on efficiency these findings suggest that further reforms aiming at removing all sorts of political influence should continue to ensure competitive environment in order to achieve cost efficiency in the financial sector of the country

the costs of global tariff barriers on wool products 1997 2005 the doha round of multilateral trade negotiations commits world trade organization wto members to improving market access for both agricultural and nonagricultural goods tariff barriers on wool products represent a small but important subset of these negotiations to inform the debate on the round we analyze the distortionary effects of recent 1997 2005 tariff barriers on wool products using a model that applies a comprehensive analytical approach with regard to the production trade and consumption of wool products we also account for any indirect effects of wool tariff barriers on the nonwool economy by incorporating the production trade and consumption of nonwool products that is the framework is a comparative static global general equilibrium model with a detailed representation of the world wool market changes in wool tariffs over 1997 2005 lead to positive welfare effects for most regions italy china and the uk are estimated to have gained the most from the changes the results indicate that the nature of recent wool tariffs severely distort the size of wool industries in different regions the changes in the output of wool commodities are extreme reflecting the discriminatory nature of the tariffs

the demand for hedging and the value of hedging opportunities hedging strategies typically assume that hedging is costless and that only one futures market exists when these assumptions are dropped the demand for hedging is shown to depend on basis risk price risk and the hedger s risk preference the marginal and incremental value of hedging opportunities are computed for the general cases of one and two markets and applied to the specific case of pennsylvania dairy input hedging copyright 2000 oxford university press

functional separability and the existence of consistent aggregates in u s manufacturing comment this paper examines the relationship between separability of the direct production function in inputs and separability of the indirect production function in input prices in particular it shows that simultaneous direct and indirect weak separability implies homotheticity of the direct production function and hence homotheticity of the indirect production function thus inferences regarding direct separability based on empirical tests for indirect separability would be valid only if homotheticity is also imposed and treated as maintained hypothesis copyright 1996 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

some consequences of credit rationing in an endogenous growth model an endogenous growth model is developed where all investment is financed via credit extension there is also an adverse selection problem in loan markets so that in equilibrium credit rationing arises endogenously the result is that equilibrium levels of credit rationing and real growth rates are jointly determined in this context several changes in the environment can have unusual consequences for instance improvements in the technology for producing capital can reduce growth because of their adverse impacts on credit rationing for similar reasons various government investment subsidies can be growth reducing this phenomenon is often observed empirically

scale biased technological development in canada s industrialization 1900 1929 the relationships between factor use and scale and technological change and scale are emphasized in a translog cost function analysis of technological development in four sectors of canadian manufacturing 1900 29 by paying particular attention to the role of electrification in this technological development the major findings are that the increased use of electricity was not in general scale dependent and that electrification may have been a factor in increasing the relative productivity of smaller scale units over the period a hypothesis that states that technical change is partially induced by increased scale is however confirmed copyright 1990 by mit press

measures of capacity utilization and its determinants a study of indian manufacturing we estimate capacity utilization cu rates in for selected industries in indian manufacturing for the 20 year period 1976 1996 we estimate a generalized leontief variable cost function with capital as a quasi fixed input to derive our cu measures using error component techniques we note substantial variations in cu both across industries and over time in general we find that cu rates were higher in the earlier time period dropped in the mid 80s and started rising again in the early 90s cu rates in our analysis are sensitive to input prices with the sole exception of the price of labor we also confirm the standard result that variations in demand are a significant driving force for variations in cu we find that cu is positively related to the magnitude of labor intensity in production this holds for both between industries and within industries empirical results also indicate that traditional measures of cu such as minimum capital output ratio and peak to peak are not appropriate proxies for

do etfs increase volatility due to their low trading costs exchange traded funds etfs are a potential catalyst for short horizon liquidity traders the liquidity shocks can propagate to the underlying securities through the arbitrage channel and etfs may increase the nonfundamental volatility of the securities in their baskets we exploit exogenous changes in index membership and find that stocks with higher etf ownership display significantly higher volatility etf ownership increases the negative autocorrelation in stock prices the increase in volatility appears to introduce undiversifiable risk in prices because stocks with high etf ownership earn a significant risk premium of up to 56 basis points monthly

gambling preferences options markets and volatility this study examines whether the gambling behavior of investors affects volume and volatility in financial markets focusing on the options market we find that the ratio of call option volume relative to total option volume is greatest for stocks with return distributions that resemble lotteries consistent with the theoretical predictions of stein 1987 we demonstrate that gambling motivated trading in the options market influences future spot price volatility these results not only identify a link between lottery preferences in the stock market and the options market but they also suggest that lottery preferences can lead to destabilized stock prices

co fluctuation patterns of per capita carbon dioxide emissions the role of energy markets abstract this paper applies principal component analysis to investigate the linkages or dominant co fluctuation patterns of per capita carbon dioxide emissions across countries for the time period 1950 2000 energy resource world markets are investigated as an offsetting mechanism possibly coordinating emission fluctuations between countries the results of the analysis provide evidence that world energy resource markets are acting as a coordinating mechanism for emission fluctuations in most cases the results also suggest that until recently the dominant emission co fluctuation pattern for developed countries differs from the dominant emission co fluctuation pattern for developing countries the common fluctuation pattern found in the 1984 2000 time period suggests that an offsetting mechanism does exist and will help contain global per capita emissions into the future the strong degree that emissions are linked between countries and energy markets acting as an offsetting mechanism suggests that to be successful a global agreement to address climate change must require emission reductions by all major emitters not just the developed countries

asymmetric substitutability between energy and capital evidence from the manufacturing sectors in 10 oecd countries abstract this paper investigates the substitutability between energy and capital in the manufacturing sectors of ten oecd countries since 1980 by applying a cost function approach that has been widely used to analyze industrial energy demand first we attempt to determine the source of the disagreement in the literature on the substitutability between energy and capital and reach a conclusion regarding the substitutability between energy and capital dividing energy and capital into sub inputs we analyze their substitutability the empirical results indicate that fuel tends to complement capital in most countries whereas electricity and capital are substitutes thus this study confirms that heterogeneity in energy sources is a primary component of the systematic variation in the substitutability between energy and capital second we examine asymmetric substitutability between energy and capital by estimating the morishima elasticity of substitution the estimates of the morishima elasticity of substitution demonstrate that the substitution of energy for capital has dominated the substitution of capital for energy this asymmetric substitutability is natural from the producer perspective because capital costs are much greater than energy costs in most countries these results imply that the adoption of energy saving technologies has not been induced in response to increased energy prices

open access and the evolution of the u s spot market for natural gas federal regulations promoting open access transportation dramatically altered the organizational structure of the u s market for natural gas in the 1980s generally unbundling the merchant and transport functions of interstate pipelines an empirical analysis of wellhead spot prices is undertaken to examine the effect of open access on the geographic scope of the spot market using monthly spot price data from 1984 91 three statistical tests are applied and compared price correlations granger causality and cointegration we find that open access integrated the regional wellhead markets into a national competitive market for natural gas the effects of unbundling on contracts for natural gas are then investigated incentives for long term contracts between pipelines and producers are shown to be effectively removed by the introduction of competitive buying and selling of gas at the wellhead through open access

constrained output maximization and us agriculture this paper presents a framework for estimating an indirect production function and then applies it to aggregate us agriculture issues addressed include tests of standard hypotheses about the underlying technology homotheticity neutral technical change etc as well as examination of consistency in aggregation and the effects of changes in the level of aggregate expenditure on farm output since there already exist several studies empirically describing agricultural production technologies with indirect objective functions one might fairly ask whether this paper really breaks any new ground we feel that it does one reason is that existing studies e g binswanger 1974 lopez 1980 ball and chambers 1982 ray 1982 and weaver 1983 all rely on either profit or cost functions to date there appears to be only one study using an indirect production appelbaum 1979 and it is not in agriculture this seems unfortunate because there are many instances in agriculture for which an indirect productio

determinants of hedging and risk premia in commodity futures markets this paper examines the determinants of commodity futures hedging and of risk premia arising from covariation of the futures price with stock market returns and with the reve nues of producers owing to supply shocks that stochastically redistribute real wealth surplus between producers and consumers and to limited participation in the futures market the total risk premium in the model is not proportional to the contract s covariance with aggregate consumption stock market variability interacts with the incentive to hedge causing the producer hedging component of the risk premium to increase de crease with income elasticity for a normal inferior good production costs that depend on output raise the premium we argue that output and demand shocks will typically be positively correlated raising the premium high supply elasticity reduces the absolute heding premium by reducing the variability of spot price and revenue