speculative investor behavior and learning as traders learn about the true distribution of some asset s dividends a speculative premium occurs as each trader anticipates the possibility of reselling the asset to another trader before complete learning has occurred small differences in prior beliefs lead to large speculative premiums during the learning process this phenomenon helps explain a paradox concerning the pricing of initial public offerings the result casts light on the significance of the common prior assumption in economic models

estimating the price premium of lng in korea and japan the price formula approach abstract focusing on the price premium which reflects the negotiation power of exporting and importing countries this study empirically investigates the liquefied natural gas lng price formula for korea and japan applying the state space model and kalman filter to the price formula adopted in the lng contracts in the asia pacific region this study estimates the long run price formula and time varying premiums on the lng import prices by trade routes from qatar oman indonesia and malaysia to korea and japan furthermore this study also discusses the differences between korea and japan and the event based changes in the price premiums namely the appearance of russia as a new supplier to korea and japan in april 2009 and the fukushima nuclear disaster in march 2011 the estimation results show that the appearance of a new supplier does not always lead to a decrease in the premium in addition lng importers in northeast asia should pay attention to demand and supply in europe as well as asia because northeast asia and europe share the same middle eastern exporting countries furthermore korea japan and other northeast countries need to establish close cooperation to enhance their negotiation power within the global lng market

optimal growth with many consumers abstract a method is described for constructing all pareto optimal allocations for a dynamic economy with many heterogeneous consumers under certainty in which both the technology and consumer preferences are recursive but preferences need not be additively separable over time optimal perfect foresight competitive equilibrium allocations are obtained through the study of a dynamic program for an economy with one consumption good sufficient conditions are given for the existence of a unique interior stationary distribution of consumption and wealth for a two person exchange economy sufficient conditions are given for the global asymptotic stability of the unique interior stationary point

the crucial relationship among energy commodity prices evidence from the spanish electricity market the main purpose of this article is twofold to analyze a the long term relation among the commodities prices and between spot electricity market price and commodity prices and b the short term dynamics among commodity prices and between electricity prices and commodity prices data between 2002 and 2005 from the spanish electricity market was used econometric methods were used in the analysis of the commodity spot price namely the vector autoregression model the vector error correction model and the granger causality test the co integration approach was used to analyze the long term relationship between the common stochastic trends of four fossil fuel prices one of the findings in the long term relation is that the prices of fuel and the prices of brent are intertwined though the prices of brent ten to move to reestablish the price equilibrium another finding is that the price of electricity is explained by the evolution of the natural gas series

the dynamic linkages between crude oil and natural gas markets abstract the time varying price spillovers between natural gas and crude oil markets for the period 1994 to 2014 are investigated contrary to earlier research we show that in a large part of our sample the natural gas price leads the price of crude oil with price spillover effects lasting up to two weeks this result is robust to a battery of tests including out of sample forecasting exercises however after 2006 we detect little price dependencies between these two energy commodities these findings arise due to a conjunction of both demand and supply side shocks arising from both natural and economic events including hurricane katrina the tohoku earthquake and the global financial crisis as well as infrastructure and technological improvements the increased use of new technologies such as hydraulic fracking for the extraction of gas and oil in particular affected supply in the latter part of the study we conclude that the long term relation present in the early part of the sample has decoupled such that price determination of these two energy sources is now independent

location and the multinational enterprise john dunning s thoughts on receiving the journal of international business studies 2008 decade award a retrospective by john h dunning on location and the mne written in the form of responses to questions posed by rajneesh narula in an interview recorded at the university of reading which was shown at the jibs decade award session at the aib annual meetings in milan june 2008

causal modeling and inference for electricity markets abstract how does dynamic price information flow among northern european electricity spot prices and prices of major electricity generation fuel sources we use time series models combined with new advances in causal inference to answer these questions applying our methods to weekly nordic and german electricity prices and oil gas and coal prices with german wind power and nordic water reservoir levels as exogenous variables we estimate a causal model for the price dynamics both for contemporaneous and lagged relationships in contemporaneous time nordic and german electricity prices are interlinked through gas prices in the long run electricity prices and british gas prices adjust themselves to establish the equilibrium price level since oil coal continental gas and eur usd are found to be weakly exogenous

the relationship between spot and contract gas prices in europe abstract following deregulations in the european gas market spot trading of natural gas has been established in the uk belgium and the netherlands while long term contracts remain the dominant pricing process in continental europe in this paper we investigate the degree of market integration between the three spot markets the contract gas price in germany and the oil price the results indicate a highly integrated market and there is no evidence of an independent price determination process for natural gas

new labour energy policy and competitive markets by the end of new labour s first term four central objectives of energy policy had become established cheap energy the relief of fuel poverty a major reduction of carbon dioxide emissions and energy security through maintaining a wide diversity of primary fuel supplies all to be achieved through competition after surveying new labour energy policy documents the paper argues that new labour failed to appreciate i the extent to which under such a laissez faire policy regime these objectives were mutually inconsistent ii that the apparent successes of energy market liberalisation during the preceding conservative governments had little to do with competition and iii that the transaction costs of injecting increasing competition into both british and european energy systems are likely to exacerbate the growing threat to energy security the paper concludes with a brief examination of the implications of transaction cost economics for the organisational structure of the uk energy supply industry

oil and gas markets in the uk evidence from a cointegrating approach the paper examines the relationship between uk wholesale gas prices and the brent oil price over the period 1996 2003 in order to investigate whether oil and gas prices decoupled during this period as orthodox gas market liberalisation theory suggests tests for unit roots and cointegration are carried out and it is discovered that a long run equilibrium relationship between uk gas and oil prices exists moreover this relationship pre dates the opening of the uk mainland europe interconnector following a recursive methodology hansen h and johansen s 1999 some tests for parameter constancy in cointegrated var models econometrics journal 2 306 333 it was found that the cointegrating relationship is present throughout the sample period however the long run solutions seem to be more volatile evidence is provided that the short run relationship is linear and impulse response functions are used to examine the effects that a shock in oil would have on gas these findings do not support the assumption that gas prices and oil prices decouple

fitting semiparametric markov regime switching models to electricity spot prices abstract recently regime switching models have become the standard tool for modeling electricity prices these models capture the main properties of electricity spot prices well but estimation of the model parameters requires computer intensive methods moreover the distribution of the price spikes must be fully specified although the high volatility of the spikes makes it difficult to check such distributional assumptions consequently there are a number of competing proposals for the distribution in the spike regime as an alternative we propose a semiparametric markov regime switching model that leaves the distribution under the spike regime unspecified we show that the model parameters can be estimated by employing robust statistical techniques this presents an alternative to the existing estimation methods that are based on computer intensive numerical maximization of the likelihood function the model in combination with the estimation framework is easier to estimate needs less computation time and distributional assumptions to show its advantages we compare the proposed model with a well established markov regime switching model in a simulation study furthermore we apply the model to log prices for the australian electricity market the results are in accordance with the results from the simulation study indicating that the proposed model might be advantageous whenever the distribution of the spike process is not sufficiently known the results are thus encouraging and suggest the use of our approach when modeling electricity prices and pricing derivatives

analysis of the nonlinear response of electricity prices to fundamental and strategic factors this paper seeks to characterize the nonlinear effects of exogenous factors on wholesale electricity price formation using a special type of regime switching the logistic smooth transition regression model we capture the mean reverting and spiky characteristics of spot prices and at the same time estimate their rather complex relationships to fundamentals we show that for different trading periods within the day prices can be a function of fundamentally different drivers in addition to including the usual fuel price demand and reserve margin drivers this analysis tests whether a market concentration variable is as significant in the high frequency context as it is known to be over the longer term the analysis is also innovative in testing the nonlinear influence of carbon emission trading

human capital and fdi inflows to developing countries new empirical evidence abstract despite the dramatic increase in total foreign direct investment fdi flows to developing countries in the last few years the bulk of the inflows has been directed to only a limited number of countries it has been argued that developing countries might enhance their attractiveness as locations for fdi by pursuing policies that raise the level of local skills and build up human resource capabilities nevertheless the empirical evidence in the literature in support of this recommendation for a large sample of developing countries is scant this paper evaluates this argument in the light of the evolution in the structural characteristics of fdi and empirically tests the hypothesis that the level of human capital in host countries may affect the geographical distribution of fdi the empirical findings are a human capital is a statistically significant determinant of fdi inflows b human capital is one of the most important determinants and c its importance has become increasingly greater through time

cointegration analysis of spot electricity prices insights on transmission efficiency in the western us abstract the us energy policy act of 1992 promoted the development of spot markets for electric power by requiring utilities to open their transmission systems to wholesale power sales in this paper we specify and estimate a vector error correction model using peak and off peak electricity spot prices during 1994 1996 covering 11 regional markets in the western united states and test these prices for evidence of market integration the results show evidence of an efficient and stable wholesale power market

european market integration for gas volume flexibility and political risk this is a copy of an article originally published by elsevier in energy economics see http www sciencedirect com science journal 03014215 2002 elsevier science b v

human capital and fdi inflow an assessment of the african case summary this study assesses the role of human capital hk on fdi inflows to sub saharan africa it uses panel data for the period 1980 2012 to asses if changing skill needs influence fdi inflows several measures of hk are used to assess whether the quality of labor explains fdi flows over the study period various versions of an fdi model were estimated and the results show that all measures of hk have a significant influence on fdi as are the traditional variables there is no evidence of the increasing importance of hk on fdi over time probably reflecting the type of fdi flowing into ssa

do household energy expenditures affect mortgage delinquency rates we postulate a direct role for energy prices in the 2008 financial crisis rising energy prices constrain consumer budgets and thereby raise mortgage delinquency rates this hypothesis is tested by estimating a quarterly cointegrating vector autoregressive cvar model that seeks to quantify the factors that influence the percentage of us mortgages that are 30 to 89 days past due and those that enter foreclosure results identify a long run relationship for the percentage of us mortgages that are 30 to 89 days past due that includes the interest rate on one year adjustable mortgages household expenditures on energy nominal home prices rates of home ownership and the fraction of mortgages 90 days or more past due that enter foreclosure unemployment rates have a short run effect together these variables account for much of the historical variation in the percentage of us mortgages that are 30 to 89 days past due and indicate that the post 2006 rise in this measure of mortgage delinquency is associated with falling home prices an increase in household expenditures on energy and rising unemployment

foreign direct investment and economic growth an increasingly endogenous relationship summary this paper investigates whether foreign direct investment fdi affects economic growth based on a panel of data for 84 countries over the period 1970 99 both single equation and simultaneous equation system techniques are applied to examine this relationship a significant endogenous relationship between fdi and economic growth is identified from the mid 1980s onwards fdi not only directly promotes economic growth by itself but also indirectly does so via its interaction terms the interaction of fdi with human capital exerts a strong positive effect on economic growth in developing countries while that of fdi with the technology gap has a significant negative impact

are oil shocks permanent or temporary panel data evidence from crude oil and ngl production in 60 countries this paper examines the unit root properties of crude oil production for 60 countries employing a range of panel data unit root tests for the period 1971 to 2003 the study first employs a number of panel data tests that do not accommodate structural breaks and then proceeds to apply the lagrange multiplier lm panel unit root test with one structural break the results of the panel data tests without a structural break are inconclusive with at best mixed support for joint stationarity the findings from the lm panel unit root test with a structural break however are conclusive suggesting that for a world panel and smaller regional based panels crude oil and ngl production are jointly stationary

government policies market imperfections and foreign direct investment the internalization eclectic theory of foreign direct investment includes the important insight that government policies create market imperfections which make foreign direct investment an economically rational strategic alternative for firms this paper reexamines the effects of government policies on market imperfections and foreign direct investment fdi it broadens and refines the analysis of the impact of government policies by developing the following arguments 1 there is a wide range of government policies that affect firms fdi decisions via their effects on market imperfections 2 there are numerous dimensions of variability in government policies that need to be identified in order to understand fully the effects of government policies on market imperfections and hence fdi flows 3 some of the effects of government policies on market imperfections and fdi are the opposite of those previously noted in the fdi literature 4 the effects of government policies vary across the several individual components of fdi flows the paper thus examines the following variables and relationships more extensively and precisely than has the previous literature government policy variables as causal factors affecting fdi market imperfection variables as intervening factors in the causal connections between government policies and fdi and the multiple indicators of the various dimensions of fdi as dependent variables

to what extent can foreign direct investment help achieve international development goals for fdi to help alleviate absolute poverty and stimulate economic growth in developing countries two conditions have to be met first developing countries need to be attractive to foreign investors second the host country environment in which foreign investors operate must be conducive to favourable fdi effects with regard to overall investment economic spillovers and income growth this paper argues that it is more difficult to benefit from fdi than to attract fdi the widely perceived concentration of fdi in few developing countries tends to obscure that in relative terms various small and poor countries are fairly attractive to fdi yet the mobilisation of domestic resources remains by far more important than attracting fdi for financing investment and stimulating economic growth furthermore high inward fdi is no guarantee for poverty alleviation and positive growth effects in particular the empirical evidence suggests that host country conditions typically prevailing in poor countries including weak institutions and an insufficient endowment of complementary factors of production constrain the growth enhancing and poverty alleviating effects of fdi the crux is that creating an environment in which fdi may deliver social returns will take considerable time exactly where development needs are most pressing

beyond entry mode choice explaining the conversion of joint ventures into wholly owned subsidiaries in the people s republic of china while there is a vast amount of research on firms choice of ownership form when entering a foreign market little attention has been paid to changes in ownership forms of operation abroad after initial entry using transaction cost economics and institutional theory we identify a number of factors that may help to explain the likelihood of foreign firms converting their joint venture with a local firm into a wholly owned subsidiary we formulate a number of hypotheses and test them against data collected through a questionnaire survey of managers representing foreign subsidiaries in the people s republic of china prc that are run either as international joint ventures ijvs or as wholly owned foreign subsidiaries wfoes that have recently been converted from ijvs into a wfoe the paper contributes to research by showing that transaction cost based thinking is useful for explaining not only the initial choice of ownership mode when entering a new market but also the potential subsequent changes of this ownership mode by combining transaction cost theory with arguments from institutional theory the study identifies a number of factors that contribute to explaining post entry changes of foreign firms ownership forms in the prc and provides empirical evidence of this phenomenon

information transmission and market interactions across the atlantic an empirical study on the natural gas market abstract this paper studies the international information transmission and market interactions in the u s and u k natural gas markets three well documented approaches are used to measure the relative importance on the process of price discovery under a quadvariate system after adjusting the effects of nonsynchronous trading prices robust results indicate our system that includes spot and futures prices within the two countries are driven by one common factor information disseminates efficiently among the four markets concerned the u s futures market dominates as the center for price discovery the u k futures market comes as the second the spot markets in the u s and u k are less efficient than their corresponding futures market where the u k spot market contributes the least and almost zero to the price discovery process asymmetric volatility spillovers are found in three of the four markets volatility in the u s futures market increases with positive returns which illustrates the inverse leverage effect in most of the commodity market volatilities in the spot markets are negatively related to returns which is analogous to the traditional leverage effect prevailing in most of the equity stock markets

the dynamics of efficient asset trading with heterogeneous beliefs this paper analyzes the dynamic properties of portfolios that sustain dynamically complete markets equilibrium when agents have heterogeneous priors we argue that the conventional wisdom that belief heterogeneity generates continuous trade and significant fluctuations in individual portfolios may be correct but it needs some qualifications we consider an infinite horizon stochastic endowment economy populated by many bayesian agents with heterogeneous priors over the stochastic process of the states of nature our approach hinges on studying the portfolios that decentralize pareto optimal allocations since these allocations are typically history dependent we propose a methodology to provide a complete recursive characterization when agents believe that the process of states of nature is i i d but disagree about the probability of the states we show that even though heterogeneous priors within that class can indeed generate genuine changes in the portfolios of any dynamically complete markets equilibrium these changes vanish with probability one if the true process consists of i i d draws from a common distribution and the support of some agent s prior belief contains the true distribution finally we provide examples in which asset trading does not vanish because either i no agent learns the true conditional probability of the states or ii some agent does not know the true process generating the data is i i d

bidding for firms recently toyota sought a plant location in the united states the 800 million plant will employ 3000 workers and numerous states offered toyota generous investment incentives hoping this would induce toyota to select their state the commonwealth of kentucky won this competition but the price was high the present value of the payments exceeds 125 million the payment of investment incentives for the toyota plant is not unique in 1976 pennsylvania paid 75 million to attract a volkswagen plan nissan honda and mazda received generous investment incentives when locating plants in the united states and this bidding is not limited to states to attract the headquarters of the presbyterian church usa with its 1300 jobs and 38 million annual payroll civic leaders in louisville kentucky offered the church a warehouse and 6 2 million for renovation of the structure bidding the church away from kansas city missouri in this paper we contend that this competition may result from the average cost pricing of publicly provided goods and services 2 when the marginal cost of providing a firm and its workers with public services is less than the tax revenue they generate a government may offer the firm subsidies that reduce the distortions the average cost pricing of the public service creates thus this competition for industry is not a zero sum game where the subsidies are only transfers from the government to the firm rather these subsidies may facilitate the efficient location of industry

oil and pump prices testing their asymmetric relationship in a robust way abstract the aim of this study is to provide a novel method to assess whether retail fuel prices respond asymmetrically to changes in the international crude oil prices to do so we consider the whole supply chain we use daily data and we depart from the current practice in the literature that focuses on prices rather we consider the mark ups of both the refineries and retailers hence we show that we first need to assess whether the refineries mark up responds asymmetrically to the international crude oil prices and subsequently whether the retailers mark up shows an asymmetric behaviour relatively to changes in the refined fuel prices focusing in greece as our case study our findings show that greek fuel retailers do not change their mark up behaviour based on changes of the refined fuel price by contrast the asymmetric behaviour is evident in the refineries mark up relatively to changes in the international crude oil prices which is then passed through to the retailers and consumers finally we provide evidence that weekly and monthly data mask any such asymmetric relationship thus we maintain that unless the appropriate data frequency fuel price transformations and the whole supply chain are considered misleading findings could be revealed

a conditionally heteroskedastic model with time varying coefficients for daily gas spot prices this paper examines the relationship between gas spot prices at the zeebrugge market one month ahead brent prices and temperatures over the period 2000 2005 a cointegration analysis is carried out and it is discovered that a cointegration relationship exists between the three series to take into account the influence of temperature on the gas volatility a garch 1 1 model with temperature dependent coefficients is considered stability and estimation properties are discussed an empirical finding is the existence of distinct volatility regimes for the volatility of gas prices depending on the temperature level

risk transmission mechanism between energy markets a var for var approach abstract the global financial crisis gfc of 2007 2009 that originated in the us has revealed the need for measuring and monitoring the transmission of extreme downside market risk this paper investigates the risk transmission mechanism between the oil and natural gas markets we apply the recently introduced test statistics based on cross quantilogram function and the multivariate quantile regression model var for var to the us oil and natural gas prices which are independently formed our results show two asymmetric patterns first the shocks in the oil market substantially increase the value at risk var in the natural gas market but the reverse impact does not exist second we highlight the significant asymmetric response of gains and losses transmission in energy markets cautioning about the underlying weakness of adopting volatility to measure risk in the energy market moreover an extreme market risk is more easily transmitted across markets than moderate risks our results are in general robust in application to other regional energy markets such as europe and asia but the heterogeneities in responses are underpinned by the different role of natural gas in regions the findings in this paper have important implications for academic researchers policy makers in gas dependent economies and business practitioners in light of projected increases in the use of natural gas worldwide as well as the development of independent gas on gas competitive hub prices in asia and europe

risk management in the oil industry can information on long run equilibrium prices be utilized abstract we analyze co movements between the prices of crude oil and major refined products during the period 1992 1998 specifically we explore the existence of long run equilibrium price relationships and whether deviations from estimated equilibrium can be utilized for predictions of short term price changes and for risk management the econometric evidence strongly supports the hypothesis that crude and product prices are co integrated past deviations from long term equilibrium are significant in an error correction specification of short term product price changes the results represent valuable information for hedging particularly in integrated oil companies for which price risk is related to margin variations

have oil and gas prices got separated abstract this paper applies vector error correction models that show that oil and natural gas prices decoupled around 2009 before 2009 us and uk gas prices had a long term equilibrium with crude prices to which gas prices always reverted after exogenous shocks both us and uk gas prices adjusted to the crude oil price individually and departure from the equilibrium gas price on one continent resulted in a similar departure on the other after an exogenous shock the adjustment between us and uk gas prices took approximately 20 weeks on average and the convergence was mediated mainly by crude oil with a necessary condition that arbitrage across the atlantic was possible after 2009 however the uk gas price has remained integrated with oil price but the us gas price decoupled from crude oil price and the european gas price as the atlantic arbitrage has halted the oversupply from shale gas production has not been mitigated by north american export as there has been no liquefying and export capacity

trade with endogenous transportation costs the case of liquefied natural gas abstract this paper investigates the relationship between lng shipping costs and regional natural gas price spreads we use data on natural gas prices and shipping costs to analyze the distribution of trade benefits within the lng value chain when shipping costs are endogenous to price spread developments our empirical analysis suggests that for the 2006 2014 period the lng shipping sector has had an implied scarcity rent on lng shipping capacity of 0 14 mmbtu for the eu us spread 0 32 mmbtu for the asia eu spread and 0 42 mmbtu for the asia us spread we highlight in a counter factual analysis that this distributional effect is not economically negligible we investigate how including endogenous transportation costs affects the measured degree of price convergence between regional natural gas markets we find that price convergence is stronger when we control for variations in transportation costs rather than implicitly assuming fixed or exogenous costs

diverse beliefs survival and the market price of risk we study prices and allocations in a complete markets pure exchange economy in which there are two types of agents with different priors over infinite sequences of the aggregate endowment aggregate consumption growth evolves exogenously according to a two state markov process the economy has two types of agents one that learns about transition probabilities and another that knows them we examine allocations the market price of risk and the rate at which asset prices converge to values that would be computed under the assumption that all agents know the transition probabilities cogley and sargent 2008 showed that market prices of risk would be high in an economy with a risk neutral bayesian representative agent who learns about the parameters of a transition matrix for aggregate consumption growth starting with a pessimistic prior in 1933 1 this article studies the robustness of that finding to a per turbation that adds a small fraction of agents who know the parameters of the trans ition matrix traders participate in a walrasian equilibrium in which they do not infer information from prices grossman 1981 23 under what we assume to be the true data generating mechanism the survival of the fittest force analysed by blume and easley 2006 causes the more knowledgeable agents influence on equilibrium prices to grow over time along with their wealth we study how quickly that dissipates the effects of the initial pessimism of the less informed agents on equilibrium prices 4 to give the survival mechanism a large scope to moderate the effects of initial pessim ism we assume complete markets that allow agents to make trades of claims to wealth that are motivated solely by the different subjective probabilities they put on future states that gives the agents many opportunities to place bets that over time stochastically increase the share of wealth of the traders who know transition probabilities we solve a pareto problem to compute competitive equilibrium prices and alloca tions thereby implicitly defining an initial allocation of wealth we study how the market price of risk evolves as a function of the relative pareto weight on the better informed agent among other things we want to know how large the pareto weight on

the impact of energy prices on the volatility of ethanol prices and the role of gasoline emissions abstract the contribution of renewable energy resources is vital for a country s economic growth by providing high efficiency in energy as well as an effective tool for the confrontation of climate change in particular concerning the eu an increase in the consumption of renewable energy resources as a proportion of the total energy consumption by its member states was set as an objective until 2020 ethanol has been widely used as a substitute to conventional energy like gasoline and oil the present paper surveys the role of alternative energy prices and gas emissions in the formation of the ethanol prices the results of the empirical survey confirmed the existence of a sole relationship among the variables employed according to the results obtained an increase in the volume of emissions or in gasoline prices results in an increase in ethanol prices while the opposite is confirmed in the case of crude oil he elasticity of ethanol prices to the increase of the emissions is another result worth mentioning indicative of the significant role of the emissions in the formation of ethanol prices

de financialization of commodities evidence from stock crude oil and natural gas markets abstract in order to investigate whether the crude oil and natural gas market volatility is influenced by the volatility in the stock market or whether these different variables move all together we introduce the volatility threshold dynamic conditional correlations vt dcc approach to investigate the spillover effect of stock market volatility index vix vstoxx on crude oil and natural gas markets during 1999 2015 and make the correlation dynamics dependent on conditional variance values through a threshold grid search algorithm by detecting one endogenous break point in the raw series we identify two clusters one in 2008 and another in 2014 due to the financial crisis and the structural low oil prices linked to changing fundamentals respectively also the u s henry hub gas seems to be associated with the stock market volatility indexes contrary to the european nbp gas which is linked to the brent besides regarding the volatility behaviors of our series the four energy variables violate their thresholds at similar moments and the stock market vix and vstoxx exhibit logically similarities co movements are detectable as well between the vix and crude oil series when investigating the volatility extracted from the garch model in addition the block dcc estimates provide ample evidence of similarities in the correlation dynamics between the crude oil and stock volatility series it should be noted that the modeling framework proposed in this paper represents a useful tool for the study of cross market contagion

electricity pool prices a case study in nonlinear time series modelling this paper considers modelling the behaviour of prices in the english and welsh wholesale electricity pool since the creation of this spot market in 1990 the process turns out to be nonlinear and a logistic smooth transition autoregressive model is fitted and shown to be superior to a linear alternative the behaviour of the estimated model is discussed and it is seen that nonlinearity is needed to describe the institutional characteristics and historical path of pool prices

modelling price and volatility inter relationships in the australian wholesale spot electricity markets this paper examines the inter relationships of wholesale spot electricity prices among the four regional electricity markets in the australian national electricity market nem namely new south wales queensland south australia and victoria using the constant conditional correlation and tse and tsui s tse y k tsui a k c 2002 a multivariate generalised autoregressive conditional heteroscedasticity model with time varying correlations journal of business and economic statistics 20 3 351 362 and engle s engle r 2002 dynamic conditional correlation a sample class of multivariate generalized autoregressive conditional heteroskedasticity models journal of business and economic statistics 20 3 339 350 dynamic conditional correlation multivariate garch models tse and tsui s tse y k tsui a k c 2002 a multivariate generalised autoregressive conditional heteroscedasticity model with time varying correlations journal of business and economic statistics 20 3 351 362 dynamic conditional correlation multivariate garch model which takes account of the student t specification produces the best results at the univariate garch 1 1 level the mean equations indicate the presence of positive own mean spillovers in all four markets and little evidence of mean spillovers from the other lagged markets in the dynamic conditional correlation equation the highest conditional correlations are evident between the well connected markets indicating the presence of strong interdependence between these markets with weaker interdependence between the not so well interconnected markets

why are companies offshoring innovation the emerging global race for talent this paper empirically studies determinants of decision by companies to offshore innovation activities it uses survey data from the international offshoring research network project to estimate the impact of managerial intentionality past experience and environmental factors on the probability of offshoring innovation projects the results show that the emerging shortage of highly skilled science and engineering talent in the us and more generally the need to access qualified personnel are important explanatory factors for offshoring innovation decisions moreover contrary to drivers of many other functions labor arbitrage is less important than other forms of cost savings the paper concludes with a discussion of the changing dynamics underlying offshoring of innovation activities suggesting that companies are entering a global race for talent

impacts of the us dollar usd exchange rate on economic growth and the environment in the united states abstract this paper investigates the impact of the usd exchange rate on economic growth and the environment in the united states by using a structural vector autoregression svar model the analysis is based on quarterly country level data on the real trade weighted us dollar index petroleum consumption renewable energy consumption net imports of pollution intensive products real gdp and co2 emissions during the 1989 2015 the result shows that the usd exchange rate is positively related to petroleum consumption net imports of the united states in pollution intensive industries with major u s trading partners real gdp and co2 emissions moreover petroleum consumption increases real gdp and domestic co2 emission levels while net imports of pollution intensive products decrease real gdp and does not significantly affect co2 emissions

gas generation and wind power a review of unlikely allies in the united kingdom and ireland no single solution currently exists to achieve the utopian desire of zero fossil fuel electricity generation until such time it is evident that the energy mix will contain a large variation in stochastic and intermittent sources of renewable energy such as wind power the increasing prominence of wind power in pursuit of legally binding european energy targets enables policy makers and conventional generating companies to plan for the unique challenges such a natural resource presents this drive for wind has been highly beneficial in terms of security of energy supply and reducing greenhouse gas emissions however it has created an unusual ally in natural gas this paper outlines the suitability and challenges faced by gas generating units in their utilisation as key assets for renewable energy integration and the transition to a low carbon future the single electricity market of the republic of ireland and northern ireland and the british electricity transmission trading agreement market are the backdrop to this analysis both of these energy markets have a reliance on gas generation matching the proliferation of wind power the unlikely and mostly ignored relationship between natural gas generation and wind power due to policy decisions and market forces is the necessity of gas to act as a bridging fuel this review finds gas generation to be crucially important to the continued growth of renewable energy additionally it is suggested that power market design should adequately reward the flexibility required to securely operate a power system with high penetrations of renewable energy which in most cases is provided by gas generation

exchange rate effect on carbon credit price via energy markets abstract this paper examines the impact of currency exchange rates on the carbon market we scrutinize this effect through the european union emission trading scheme eu ets which primarily uses two substitutable fossil energy inputs for the generation of electricity coal and natural gas the european coal market is directly driven by global coal markets that are denominated in usd whereas natural gas is mainly imported from russia and is denominated in euros the impulse response functions of a structural vector autoregression svar model demonstrate that a shock in the euro usd exchange rate can be transmitted through the channel of energy substitution between coal and natural gas and influence on the carbon credit market

russian gas exchange a new indicator of market efficiency and competition or the instrument of monopolist abstract russian government sanctioned the first gas trade at the saint petersburg international mercantile exchange spimex in 2012 as a part of the gas industry national strategy federal antimonopoly service fas proposed a reform aimed to boost competition among producers and to increase consumer welfare the proposal included lifting of price floor regulation for gazprom that supposed to be a vital element of transition from the government price regulation to spimex benchmark for over the counter otc segment structural reform of this scale has never happened in russia furthermore there are only descriptive studies in the existing literature this paper aims to fill this gap by testing market efficiency in spimex based on fama s theory with the well established model we test the consistency of gas futures and spot prices for unbiasedness we imply this methodology because in transition to exchange benchmark it is necessary that price is formed under market forces and is not influenced by players who have market power or dominance to make a reasonable conclusion we supplement the simulation by relevant qualitative analysis of liquidity price differentials between contracts and market concentration in the exchange the goal of the paper is to answer whether the exchange price today can be a benchmark and substitute for the state regulated price combined with qualitative analysis we argue that the scheduled deregulation counterintuitively may improve the dominance of gazprom in the domestic market

beyond natural resources horizontal and vertical fdi diversification in sub saharan africa this article uses firm level data to analyse the drivers of foreign direct investment fdi to the manufacturing and services sectors of 30 sub saharan african countries it shows that improving the investment climate helps to attract aggregate fdi by analysing disaggregate fdi data the article establishes that there is considerable contrast in behaviour between vertical fdi foreign firms producing for export and horizontal fdi foreign firms producing for local markets in particular the latter firms are attracted to areas with higher trade regulations highlighting their interest in protected markets furthermore horizontal fdi is more affected by financing and human capital constraints and less affected by infrastructure and institutional constraints than vertical fdi is

removing the government from european gas abstract governments have been heavily involved in the development of the european natural gas industry since the discovery of the dutch supergiant groningen field in 1959 their involvement reflected the prevailing intervntionist approach to economic management as well as concerns over security of supply after 1980 they rightly withdrew from active intervention in the oil market however their continued presence at an operational level is now an obstacle to the successful development of the natural gas industries in a number of key markets the british experience over the past ten years has shown that privatisation and the determined introduction of competition leads to greater flexibility of efficiency in energy supply as well as significantly lower prices it has also produced for the first time outside north america a genuine gas price index the recent european uniondirectives on gas and electricity have given a gentle shove to the competitive process on the continent governments even those in two minds about competition should stand aside and the let the market do its work

what drives natural gas prices a structural var approach abstract in this study we develop a structural vector autoregressive model var for the german natural gas market our setup allows us to analyze the determinants of the natural gas price in a comprehensive framework in particular we illustrate the usefulness of our approach by disentangling the effects of different fundamental influences on gas prices during three recent supply interruptions the russian ukrainian gas dispute of january 2009 the libyan civil war in 2011 and the withheld russian exports in february 2012 our results show that the natural gas price is affected by temperature storage and supply shortfalls in the short term while the long term development is closely tied to both crude oil and coal prices capturing the economic climate and the substitution relationship between the different energy commodities

forecasting power prices using a hybrid fundamental econometric model we investigate the performance of two hybrid forecasting models to predict the next day base load electricity prices on the apx power exchange for great britain hybrid models have often been advocated as a synthetic method for forecasting but it is an open question how well they perform at the day ahead stage a conventional hybrid approach combines a fundamental model formulated with supply stack modeling with an econometric model using data on price drivers we extend this model to one based upon logistic smooth transition regression which represents a regime switching for periods of structural change empirical results for out of sample forecasting using both hybrid approaches are discussed and compared to non hybrid time series forecasting methods

transmission of prices and price volatility in australian electricity spot markets a multivariate garch analysis this paper examines the transmission of spot electricity prices and price volatility among the five regional electricity markets in the australian national electricity market namely new south wales queensland south australia the snowy mountains hydroelectric scheme and victoria a multivariate generalised autoregressive conditional heteroskedasticity model is used to identify the source and magnitude of price and price volatility spillovers the results indicate the presence of positive own mean spillovers in only a small number of markets and no mean spillovers between any of the markets this appears to be directly related to the physical transfer limitations of the present system of regional interconnection nevertheless the large number of significant own volatility and cross volatility spillovers in all five markets indicates the presence of strong autoregressive conditional heteroskedasticity and generalised autoregressive conditional heteroskedasticity effects this indicates that shocks in some markets will affect price volatility in others finally and contrary to evidence from studies in north american electricity markets the results also indicate that australian electricity spot prices are stationary

firm ownership preferences and host government restrictions an integrated approach two approaches may explain how multinational enterprises mnes select ownership structures for subsidiaries the first argues that mnes prefer structures that minimize that transaction costs of doing business abroad the second argues that ownership structures are determined by negotiations with host governments whose outcomes depend on the bargaining power of the firm this paper presents a framework integrating these two approaches and uses statistical methods to separate their effects empirically

information spillovers and connectedness networks in the oil and gas markets abstract this paper investigates the oil gas relationship from a multi scale perspective by combining the connectedness network framework and the ensemble empirical mode decomposition eemd method the empirical results show that the direction and magnitude of the information flow between oil and gas returns behave differently across time scales in general wti and its refinery products tend to act as net information transmitters while the united states and united kingdom natural gas markets act as net receivers the total spillover connectedness for the oil and gas markets as measured by a rolling window approach has dynamic volatile characteristics the robustness of the results is shown by substituting brent for wti

investigating geography and institutions as determinants of foreign direct investment in africa using panel data this article uses a cross country econometric approach to identify the determinants for foreign direct investment fdi in africa the contribution is 3 fold firstly we recognize that the estimation techniques used elsewhere such as ordinary least squares may be flawed we therefore use a dynamic one step generalized method of moments gmm estimator due to arellano and bond 1991 the gmm estimates identified a number of robust determinants of fdi namely government consumption inflation rate investment governance political stability accountability regulatory burden rule of law and initial literacy it is concluded that geography does not seem to have a direct influence on fdi flows to africa neither market seeking nor re exporting motives of fdi seem to dominate with different policy instruments being significant in the different specifications this does not discount the importance of good policies but probably indicates the importance of good policies made by good institutions institu

jump spillovers in energy futures markets implications for diversification benefits abstract in this paper we investigate jump spillover effects of five energy petroleum futures and their implications for diversification benefits in order to identify the latent historical jumps for each of these energy futures we use a bayesian mcmc approach to estimate a jump diffusion model for each we examine the simultaneous jump intensities of pairs of energy futures and the probabilities that jumps in crude oil and natural gas cause jumps or usually large returns in other energy futures in all cases we find significant evidence that the diffusion jump process is a better characterization for energy futures prices we further find that jump spillovers significantly reduce the diversification benefits of an energy futures portfolio in a tranquil rather than crisis period

regime jumps in electricity prices many countries are liberalizing their energy markets participants in these markets are exposed to market risk due to the characteristics of electricity price dynamics electricity prices are known to be mean reverting very volatile and subject to frequent spikes models that describe the dynamics of electricity prices should incorporate these characteristics in order to capture the price spikes many researchers have introduced stochastic jump processes but we argue and show that this specification might lead to potential problems with specifying the true amount of mean reversion within the process in this paper we propose a regime switching model that models price spikes separated from normal mean reverting prices

the effect of global oil price shocks on china s agricultural commodities abstract this paper studied the effect of global oil price shocks on agricultural commodities in china including strong wheat corn soybean bean pulp cotton and natural rubber we regarded oil price volatility process as a combination of continuous process and jump process we not only separated oil price shocks into positive and negative categories to identify different effects on agricultural commodities in continuous process but also investigated how jump behavior influenced these agricultural commodities we found that the oil price was characterized by volatility clustering and jump behavior at the same time oil price shocks had different effects on agricultural commodities in addition the shocks on most agricultural commodities were asymmetric only natural rubber was under influence of the jump intensity of the oil price in contrast to strong wheat corn soybean bean pulp and cotton

the market organism long run survival in markets with heterogeneous traders abstract the information content of prices is a central problem in the general equilibrium analysis of competitive markets rational expectations equilibrium identifies conditioning simultaneously on contemporaneous prices and private information as the mechanism by which information enters prices here we look to the ecology of markets for an explanation of the information content of prices markets could select across traders with different beliefs or reminiscent of the wisdom of crowds markets could balance the diverse information of many participants we provide theoretical support in favor of the first mechanism and against the second along the way we demonstrate that the necessary condition for long run survival in complete markets found in sandroni 2000 do markets favor agents able to make accurate predictions econometrica 68 6 1303 1342 and in blume and easley 2006 if you re so smart why aren t you rich belief selection in complete and incomplete markets econometrica 74 4 929 966 is not sufficient for long run survival we also demonstrate some surprising behavior of market prices when several trader types with different beliefs survive this paper continues the research program of blume and easley 1992 evolution and market behavior journal of eonomic theory 58 1 9 40 and beker and chattopadhyay 2006 consumption dynamics in general equilibrium a characterisation when markets are incomplete university of warwick unpublished

investment and bilateral insurance abstract private information may limit insurance possibilities when two agents get together to pool idiosyncratic risk however if there is capital accumulation bilateral insurance possibilities may improve because misreporting distorts investment we show that if one of the pareto weights is sufficiently large that agent does not have incentives to misreport this implies that under some conditions the full information allocation is incentive compatible when agents have equal pareto weights in the long run either one of the agents goes to immiseration or both agents lifetime utilities are approximately equal the second case is only possible with capital accumulation

the effect of population health on foreign direct investment inflows to low and middle income countries this paper investigates the effect of population health on gross inflows of foreign direct investment fdi we conduct a panel data analysis of 74 industrialized and developing countries over 1980 2000 our main finding is that gross inflows of fdi are strongly and positively influenced by population health in low and middle income countries our estimates suggest that raising life expectancy by one year increases gross fdi inflows by 9 after controlling for other relevant variables these findings are consistent with the view that health is an integral component of human capital for developing countries

further evidence on the debate of oil gas price decoupling a long memory approach abstract the long run oil gas price relationship has been challenged more often in recent years as these two prices have shown evidence of decoupling from each other this paper proposes the use of a long memory approach and a rolling windows method to model the time varying oil gas price relationship in three markets namely the united states europe and japan the results extend existing research conclusions on the oil gas price relationship and answer the question of whether it is a temporary phenomenon or a permanent market change our findings indicate that the us oil gas relationship remains nonstationary at almost all windows and illustrate strong evidence of decoupling conversely the european and asian oil gas prices exhibit temporary decoupling over time although the overall relationship still favours the oil indexation hypothesis the us experience suggests that oil and gas do not share the same fundamentals and a pricing hub can better reflect the true value of natural gas policy makers in europe and asia should reinforce their efforts towards a market based pricing mechanism for gas

the volatility of offshore investment abstract offshore investment often bears the image of footloose industry with little to hinder movement to the most favorable environment an effort to describe this particular segment of u s direct investment supports some elements of the colorful anecdotal portrait painted by critics in the third world semiconductor assemblers are moderately sensitive to wage rates and adjust quite rapidly in maintaining what they perceive as a diversified portfolio of risky ldc production locations on the other hand this reaction is small enough to guarantee that modest increases in wages will not send all investment fleeing from an export platform new methods of modelling direct foreign investment when risk diversification is important in explaining industrial location decisions are introduced in this paper

consumption dynamics in general equilibrium a characterisation when markets are incomplete we introduce a methodology for analysing infinite horizon economies with two agents one good and incomplete markets we provide an example in which an agent s equilibrium consumption is zero eventually with probability one even if she has correct beliefs and is marginally more patient we then prove the following general result if markets are effectively incomplete forever then on any equilibrium path on which some agent s consumption is bounded away from zero eventually the other agent s consumption is zero eventually so either some agent vanishes in that she consumes zero eventually or the consumption of both agents is arbitrarily close to zero infinitely often later we show that a for most economies in which individual endowments are finite state time homogeneous markov processes the consumption of an agent who has a uniformly positive endowment cannot converge to zero and b the possibility that an agent vanishes is a robust outcome since for a wide class of economies with incomplete markets there are equilibria in which an agent s consumption is zero eventually with probability one even though she has correct beliefs as in the example in sharp contrast to the results in the case studied by sandroni 2000 29 and blume and easley 2006 8 where markets are complete our results show that when markets are incomplete not only can the more patient agent or the one with more accurate beliefs be eliminated but there are situations in which neither agent is eliminated c 2010 elsevier inc all

how does the u s natural gas market react to demand and supply shocks in the crude oil market abstract in this paper we use monthly data over the period from january 1976 to december 2012 and a structural var model to disentangle demand and supply shocks in the global crude oil market and investigate their effects on the real price of natural gas in the united states we identify the model by assuming that innovations to the real price of crude oil are predetermined with respect to the natural gas market and show that close to 45 of the variation in the real price of natural gas can be attributed to structural supply and demand shocks in the global crude oil market

rockets and feathers meet joseph reinvestigating the oil gasoline asymmetry on the international markets abstract we reinvestigate the rockets and feathers effect between retail gasoline and crude oil prices in a new framework of fractional integration long term memory and borderline non stationarity the most frequently used error correction model is examined in detail and we find that the prices return to their equilibrium value much more slowly than would be typical for the error correction model such dynamics is usually referred to as the joseph effect the standard procedure is shown to be troublesome and we introduce two new tests to investigate possible asymmetry in the price adjustment to equilibrium under these complicated time series characteristics on the dataset of seven national gasoline prices we find no statistically significant asymmetry the proposed methodology is not limited to the gasoline and crude oil case but it can be utilized for any asymmetric adjustment analysis

germany s nuclear power plant closures and the integration of electricity markets in europe this paper examines the potential implications of national policies that lead to a sudden increase of wind power in the electricity mix for interconnected european electricity markets more specifically it examines market integration before and after the closures of eight nuclear power plants that occurred within a period of a few months in germany during 2011 the short and long run interrelationships of daily electricity spot prices from november 2009 to october 2012 in apx endex belpex epex de epex fr nordpool omel and swissix and wind power in the german system are analysed two mgarch multivariate generalized autoregressive conditional heteroscedasticity models with dynamic correlations are used to assess spot market behaviour in the short run and a fractional cointegration analysis is conducted to investigate changes in the long run behaviour of electricity spot prices results show positive time varying correlations between spot prices in markets with substantial shared interconnector capacity a negative association between wind power penetration in germany and electricity spot prices in the german and neighbouring markets and for most markets a decreasing speed in mean reversion

gas versus oil prices the impact of shale gas abstract what significance will developments in shale gas production have for european gas prices some commentators paint a gloomy picture of the future gas markets but most forecasts for the oil market are positive consequently a view appears to prevail that price trends will differ sharply between oil and gas markets this article looks at developments in us shale gas production and discusses their impact on the movement of european gas prices the relationship between oil and gas prices over time is also analysed

international investment location decisions abstract in international location tournaments governments compete for foreign investment with tax and other short run incentives such tournaments can be won if agglomeration economies are sufficiently powerful to overcome investors desire to spread investments as a hedge against risk we focus on manufacturing investments by u s multinationals in the 1980s our econometric results suggest that agglomeration economies are indeed the dominant influence on investor calculations paradoxically short run incentives have limited apparent impact on location choice we conclude that high cost tournament play is unnecessary for countries with good infrastructure development specialized input suppliers and an expanding domestic market

the message in north american energy prices how similar is the price behavior of north american natural gas fuel oil and power prices using current state of the art econometric methodology we explore the degree of shared trends across north american energy markets across these markets there appear to be effective arbitraging mechanisms for the price of natural gas and fuel oil but not for the price of electricity

the long term effect of renewable electricity on employment in the united kingdom abstract assessment of the employment impact of renewable electricity technologies is generally implemented through either complex and data intensive methods such as computable general equilibrium models or simplistic approaches normally focused on specific energy generation technologies such as employment factors in contrast this article proposes a transparent and easily reproducible econometric methodology based on the vector error correction model that uses aggregated and widely available data the model is applied to the power generation sector in the united kingdom using annual data from 1990 onwards and provides evidence that the long term employment impact of renewable technologies is much higher than the impact arising from deploying nuclear or natural gas technologies the impulse response function analysis indicates that a permanent 1 gigawatt hours increase in annual electricity supply generated by renewable technologies creates 3 5 jobs in the long term period finally this study derives the implications of the findings in the context of decarbonisation scenarios for the power sector in the united kingdom and assesses the extent to which decarbonisation pathways based on renewable electricity contribute to stimulating employment in the generation sector

the residential demand for electricity in australia an application of the bounds testing approach to cointegration this paper reports estimates of the long and short run elasticities of residential demand for electricity in australia using the bounds testing procedure to cointegration within an autoregressive distributive lag framework in the long run we find that income and own price are the most important determinants of residential electricity demand while temperature is significant some of the time and gas prices are insignificant our estimates of long run income elasticity and price elasticity of demand are consistent with previous studies although they are towards the lower end of existing estimates as expected the short run elasticities are much smaller than the long run elasticities and the coefficients on the error correction coefficients are small consistent with the fact that in the short run energy appliances are fixed

vertical multinationals and host country characteristics abstract we inquire into the question of what country characteristics particularly market size and labor force composition attract inward investment this approach is motivated by the empirical observation that the poorest countries attract a far smaller share of world direct investment than their share of income small markets receive less investment per capita than larger ones we develop a model that generates both stylized facts in equilibrium suggesting the existence of a development trap for small skilled labor scarce countries

price dynamics in european petroleum markets this paper analyses horizontal and vertical price dynamics in the eu petroleum markets the results indicate that the cross country price differentials have significant impact on the local price adjustments we investigate the cross national price spill overs and find that the extent of the welfare transfer due to asymmetric price transmission when analysed in a cross country setting is less pronounced than claimed in previous contributions in this area we also find empirical evidence although indirect for the politically charged concept of fuel tourism using a pan european cross product time series dataset