price distortions in agriculture and their effects an international comparison the central thesis of this paper is that agricultural pricing policies pursued by developing countries produce effects which are diametrically opposite to those produced by the pricing policies of many developed countries and that the policies of both are costly in terms of global welfare in general the agricultural sector in developing countries is heavily taxed while that in the developed countries receives substantial price protection the effects of agricultural price distortions on output consumption trade and rural employment are estimated for nine countries in addition the effects of price distortions on the distribution of income between producers and consumers on government revenue and foreign exchange and the net social losses of the policies are calculated the results indicate that there are large income transfers and impacts on migration from the rural to the urban sector in developing countries and from the urban to the rural sector in developed economies

the u s and u k great depressions through the lens of neoclassical growth theory neoclassical growth theory is increasingly being used to study great depressions see e g mario j crucini and james kahn 1996 cole and ohanian 1999 2001a b 2002 michael bordo et al 2000 see also the january 2002 issue of the review of economic dynamics this paper extends our recent work that focuses on why the u s and u k great depressions lasted so long one of the key messages from our work is that the standard neoclassical growth model fails to account for the long duration of these depressions this paper extends our work by diagnosing the specific failures of the model we do this by measuring the deviations in the model s first order conditions we then use these deviations to identify particular factors that might account for these long durations we find very large deviations in the model s household labor efficiency condition in both countries and in the firm s labor efficiency condition in the united states these deviations provide new support for our recent conclusions that distorting labor market policies are key factors behind the long durations of both depressions cole and ohanian 2001a b

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

food grain policy in the republic of korea the economic costs of self sufficiency governments in many countries have manipulated agricultural prices to achieve a variety of social economic and political objectives these policies which often conflict with the prescriptions of neoclassical trade theory have led economists toward attempts to estimate the welfare losses associated with government intervention in the marketplace of more interest to many governments is the performance of changes in policy aimed at attaining specific national goals this paper addresses the case of food grain policy in the republic of korea and assesses the impacts of the change in grain price policy that occurred at the end of the 1960s in particular the success of price policy in attaining self sufficiency and raising farm incomes is evaluated the implications for consumers producers foreign exchange earnings and price stability are also analyzed it is worth noting here that through policy nations pursue a wide range of noneconomic objectives that are impossible to quantify in considering the findings of this analysis the reader should be cognizant of these other objectives and implications that are not specifically included

technical efficiency of french nuclear energy plants this article analyses the efficiency of french nuclear energy plants belonging to edf electricity of france from 2004 to 2008 with a dea data envelopment analysis model the convexity model is used to investigate the technical efficiency of a representative sample of nuclear plants the results indicated that some plants have undergone an improvement in technical efficiency while others have regressed in terms of technical efficiency policy implications related to the results are discussed

the overnight risk premium in electricity forward contracts abstract we analyze the risk premium on electricity forward contracts traded for the nordic and german austrian electricity markets we argue that finding risk premiums by analyzing overnight returns is more relevant than the frequently used ex post approach the derivatives in these markets can be characterized as trading products and hedging products each contract shows a clear increase in trading volume and liquidity when approaching maturity we link this to a testable hypothesis where financial traders are compensated for holding price risk and where the sign and magnitude of the risk premium changes depending on the hedging pattern of producers and retailers incorporating this in regressions we find that there are higher risk premiums in the period before the forwards become front products compared to the risk premiums in the front period quarterly and monthly contracts show the most significant results

pricing forward contracts in power markets by the certainty equivalence principle explaining the sign of the market risk premium in this paper we provide a framework that explains how the market risk premium defined as the difference between forward prices and spot forecasts depends on the risk preferences of market players and the interaction between buyers and sellers in commodities markets this premium is an important indicator of the behavior of buyers and sellers and their views on the market spanning between short term and long term horizons we show that under certain assumptions it is possible to derive explicit solutions that link levels of risk aversion and market power with market prices of risk and the market risk premium we apply our model to the german electricity market and show that the market risk premium exhibits a term structure which can be explained by the combination of two factors firstly the levels of risk aversion of buyers and sellers and secondly how the market power of producers relative to that of buyers affects forward prices with different delivery periods

optimal grain pricing and storage policy in controlled agricultural economies application to zimbabwe abstract maize pricing and storage policies of zimbabwe s grain marketing board are compared to those that would be optimal under certain objective function risk and risk aversion assumptions optimal producer prices and storage levels are found to be interdependent and to respond to prices at other levels of the marketing chain the ideal maize reserve stock increases with uncertainty over import transportation costs a factor to consider in light of the threat of south african sanctions but at a reasonable risk aversion level optimal reserves still are much lower than those presently held by the board

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

the cyclicality of separation and job finding rates this paper uses cps gross flow data to analyze the business cycle dynamics of separation and job finding rates and to quantify their contributions to overall unemployment variability cyclical changes in the separation rate are negatively correlated with changes in productivity and move contemporaneously with them while the job finding rate is positively correlated with and tends to lag productivity contemporaneous fluctuations in the separation rate explain between 40 and 50 percent of fluctuations in unemployment depending on how the data are detrended this figure becomes larger when dynamic interactions between the separation and job finding rates are considered

pricing of electricity futures based on locational price differences the case of finland abstract we find that the pricing of finnish electricity market futures has been inefficient during the latest 10 years when the trading volumes of electricity price area differentials epads have more than doubled even though the calculated futures premium on epads is related to some risk measures and the variables capturing the demand and supply conditions in the spot electricity markets there has been a significant positive excess futures premium in the finnish market and financial market participants should have been able to utilize this also in economic terms this finding is new and relevant for the participants of the nordic electricity markets also in the future because both the speculative and hedging based trading is increasing in the nordic markets

heterogeneity and aggregation implications for labor market fluctuations we demonstrate that aggregate employment and consumption can increase without a corresponding movement in productivity in a model with heterogeneous agents where the only aggregate disturbance is a productivity shock the interaction between incomplete capital markets and indivisible labor results in a low employment productivity correlation and creates a time varying wedge between the marginal rate of substitution for commodity consumption and hours and productivity our results caution against viewing the measured wedge as an inefficiency due to a failure of labor market clearing or as a fundamental driving force behind business cycles jel d31 e32 j22 j24 j31

california electricity futures the nymex experience it would be easy to attribute the collapse of the futures market in california electricity to the alleged manipulations of over the counter traders this paper provides evidence to the contrary findings reveal an active market that lost the speculative and small investor interest leaving hedgers to face hedgers in a volatile and less active arena hedge ratio analysis shows an erratic price matching ability that many times suggested a long hedge when a short would be expected overall contract failure could be attributed to inaccurate hedging opportunities and lack of speculative interest to keep the market going during lulls in hedging demand

locational price spreads and the pricing of contracts for difference evidence from the nordic market in electricity markets not only does the risk of substantial price variations over time exist but so does the risk of price variations over space as prices between locations can differ due to transmission congestion to manage this risk contracts for difference cfds i e forwards on the spread between a particular area price and the unconstrained system price were introduced at the scandinavian electricity exchange nord pool at the end of 2000 we empirically investigate the pricing of these cfds over the period 2001 through 2006 and find that cfd prices contain significant risk premia their sign and magnitude however differ substantially between areas and delivery periods because areas are subject to transmission congestion to a varying extent while the relation between risk premia and time to maturity is not uniform for cfds there is a negative relation for implied area and system forwards which can be explained by the relative hedging demand of market participants in addition we find that risk premia of cfds and implied area forwards vary systematically with the variance and skewness of the underlying spot prices this confirms both implications of the bessembinder and lemmon bessembinder h lemmon m l 2002 equilibrium pricing and optimal hedging in electricity forward markets journal of finance 57 1347 1382 model

the labor wedge as a matching friction abstract we use a search and matching model to decompose the labor wedge into three classes of labor market frictions and evaluate their role for the labor wedge and unemployment we find that there is an asymmetric effect of labor market frictions on the labor wedge and unemployment while the wedge is to a large extent explained by changes in matching efficiency unemployment is accounted for by the combination of frictions to matching efficiency job destruction and bargaining if search and matching frictions give rise to the labor wedge then it is relevant for explaining unemployment mainly through changes in matching efficiency

food self sufficiency making sense of it and when it makes sense food self sufficiency gained increased attention in a number of countries in the wake of the 2007 08 international food crisis as countries sought to buffer themselves from volatility on world food markets food self sufficiency is often presented in policy circles as the direct opposite of international trade in food and is widely critiqued by economists as a misguided approach to food security that places political priorities ahead of economic efficiency this paper takes a closer look at the concept of food self sufficiency and makes the case that policy choice on this issue is far from a straightforward binary choice between the extremes of relying solely on homegrown food and a fully open trade policy for foodstuffs it shows that in practice food self sufficiency is defined and measured in a number of different ways and argues that a broader understanding of the concept opens up space for considering food self sufficiency policy in relative terms rather than as an either or policy choice conceptualizing food self sufficiency along a continuum may help to move the debate in a more productive direction allowing for greater consideration of instances when the pursuit of policies to increase domestic food production may make sense both politically and economically

stochastic factor model for electricity spot price the case of the nordic market this paper presents a stochastic factor based approach to mid term modeling of spot prices in deregulated electricity markets the fundamentals affecting the spot price are modeled independently and a market equilibrium model combines them to form spot price main advantage of the model is the transparency of the generated prices because each underlying factor and the dynamics between factors can be modeled and studied in detail paper shows realistic numerical examples on the forerunner scandinavian electricity market the model is used to price an exotic electricity derivative

merit order effects of renewable energy and price divergence in california s day ahead and real time electricity markets abstract we answer two policy questions 1 what are the estimated merit order effects of renewable energy in the california independent system operator s caiso s day ahead market dam and real time market rtm and 2 what causes the hourly dam and rtm prices to systematically diverge the first question is timely and relevant because if the merit order effect estimates are small california s renewable energy development is of limited help in cutting electricity consumers bills but also has a lesser adverse impact on the state s investment incentive for natural gas fired generation the second question is related to the efficient market hypothesis under which the hourly rtm and dam prices tend to converge using a sample of about 21 000 hourly observations of caiso market prices and their fundamental drivers during 12 12 2012 04 30 2015 we document statistically significant estimates p value 0 01 for the dam and rtm merit order effects this finding lends support to california s adopted procurement process to provide sufficient investment incentives for natural gas fired generation we document that the rtm dam price divergence partly depends on the casio s day ahead forecast errors for system loads and renewable energy this finding suggests that improving the performance of the caiso s day ahead forecasts can enhance trading efficiency in california s dam and rtm electricity markets

optimal hedging in futures markets with multiple delivery specifications nearly all futures contracts allow delivery of any of several qualities of the underlying asset consequently the price of the futures contract is associated more with the price of the expected cheapest deliverable variety than with the price of the par delivery variety the delivery specifications introduce a delivery risk for every hedger in the market we derive the optimal hedging strategies in these markets their hedging effectiveness is evaluated for wheat futures contracts in chicago hedging optimally would have significantly reduced the variance of the rates of return on hedges while yielding similar mean returns nearly all futures contracts on commodities and financial assets allow the seller to deliver any of several qualities of the underlying asset the contracts specify discounts or premiums for delivering a nonpar quality but the realized price differences can be significantly different consequently the futures price on a delivery date converges to the spot price of the quality that is cheapest to deliver rather than the spot price of the par delivery quality since it is uncertain which quality will be the cheapest to deliver this introduces a delivery risk for every hedger in the market gay and manaster 9 and kane and marcus 13 find that hedgers in the treasury bond futures market have neither hedged nor exploited the delivery specifications in an optimal way 1 this paper addresses how to hedge optimally in futures markets with multiple delivery specifications 2 we derive the optimal hedging strategies and evaluate their hedging effectiveness futures markets are hedging markets working 20 they enable traders to hedge the risk of unexpected changes in the spot price of their asset the hedging effectiveness of futures markets is therefore an important issue earlier studies include ederington 3 figlewski 5 and koppenhaver 16 among others this study also differs from those studies in that we evaluate an ex ante hedging

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

optimal monetary policy with labor market frictions the role of the wage channel this paper introduces right to manage bargaining into a labor search model with sticky prices instead of standard efficient bargaining and examines the ramsey optimal monetary policy without real wage rigidity even when the steady state is inefficient price stability is nearly optimal in response to technology or government shocks right to manage bargaining creates the wage channel to inflation because there is a direct relationship between real wages and real marginal cost in the presence of the wage channel price markups consist of only real marginal cost and real wages and hours per worker are determined such as in the walrasian labor market

corporate hedging under a resource rent tax regime in addition to the ordinary corporate income tax special purpose taxes are sometimes levied to extract abnormal profits arising from the use of natural resources such dual tax regimes exist in norway for oil and hydropower where the corresponding special purpose tax bases are unaffected by any derivatives payments dual tax firms with hedging programs therefore face the risk of potentially large discrepancies between the tax bases for corporate income tax and special purpose tax i investigate how this tax base asymmetry influences the extent of hedging of value maximizing firms facing hedgeable as well as unhedgeable risk dual tax firms facing deadweight costs in low profit events generally demand less hedging than ordinary firms but otherwise respond similarly to characteristics of the underlying risk exposures the special purpose tax does not influence firms hedge portfolios in the absence of deadweight cost

directed search with multi vacancy firms abstract i construct a directed search model in which firms decide whether to enter a market and how many positions to create within this framework the number of firms and the size of each firm are determined endogenously wages play an allocative role in the matching process and the frictions inherent in this process derive from the equilibrium behavior of workers and firms i characterize the unique equilibrium comparative statics generate testable implications for cross sectional variation in matching efficiency as well as the dynamic behavior of vacancies and unemployment moreover allowing for ex ante heterogeneity across firms the model can easily and naturally generate the observed relationship between firm size wages profitability and hiring

business cycles and labor market search the quantitative implications of labor market search for economic fluctuations are evaluated in the context of a real business cycle model incorporating labor market search into the model is found to improve its empirical performance along several dimensions in particular hours now fluctuate substantially more than wages and the contemporaneous correlation between hours and productivity falls in addition the model replicates the observation that output growth displays positive autocorrelation at short horizons overall the empirical results suggest that the labor market search environment embodies a quantitatively important propagation mechanism copyright 1996 by american economic association

pricing of contracts for difference in the nordic market abstract the purpose of this paper is to give an introduction to and a pricing analysis of a new forward locational price differential product contracts for difference cfd introduced the 17th of november 2000 at nord pool the nordic electricity exchange to our knowledge there is no literature available of how the nordic cfds are priced the cfd is a forward market product with reference to the difference between the future seasonal area price and system price by using available historical trading prices and spot prices for four seasonal contracts and one yearly contract we analyze the relationships between the contract prices and the value of the underlying asset for the first four seasonal contracts it appears that cfds traded at nord pool are mostly over priced relative to the underlying asset pricing theory for forward contracts explains this by the presence of a majority of risk averse consumers who are willing to pay a risk premium for receiving the future price differential we utilize statistical analysis with regard to the contract prices and the underlying asset and find some interesting relationships the analysis is preliminary due to the fact that the cfd market is relatively new

how much should we pay for interconnecting electricity markets a real options approach abstract an interconnector is an asset that gives the owner the option to transmit electricity between two locations in financial terms the value of an interconnector is the same as a strip of real options written on the spread between power prices in two markets we model the spread based on a seasonal trend mean reverting gaussian process and mean reverting jump process and express the value of these real options in closed form the valuation tool is applied to five pairs of european neighboring markets to value a hypothetical one year lease of the interconnector using different assumptions about the seasonal component of the spread and different liquidity caps which proxy for the depth of the interconnected power markets we derive no arbitrage lower bounds for the value of the interconnector in terms of electricity futures contract and find that depending on the depth of the market the jumps in the spread can account for between 1 and 40 of the total value of the interconnector the two markets where an interconnector would be most resp least valuable are germany and the netherlands resp france and germany finally we provide rules of thumb to interpret the different interconnector values