inflation targeting what can the ecb learn from the recent experience of the bank of england establishment of the european central bank presents a rare opportunity to define the operations of a central bank without a prior track record this paper asks what might be learnt from the recent experience of inflation targeting at the bank of england before the ecb specifies an as yet undefined operational target we consider whether there should be single or multiple targets and which inflation measure should be used if at all if inflation is targeted then a forecast of its value becomes the intermediate variable this raises an issue of transparency and the compensating supply of information necessary to fill the gap but too much openness can also be problematic the ecb must be accountable and the contracting approach may be useful although being seen to say and do the same thing is ultimately most important opportunity presents itself to define the provisions for the structure and operation of a central bank without a prior historical track record some of these are already written into the statutes of the maastricht treaty which for example defines the ecb s primary statutory duty to be that of the pursuit of price stability and it has been the remit of the european monetary institute emi to make recommendations on other aspects critically however the terms of reference for the ecb in relation to an operational target for its monetary policy are yet to be resolved and although a statement from the ecb is expected to clarify the issue by september after this paper was finalised this need not be the end of the matter circumstances could well call for a subsequent recommendation the emi 1997 provisionally narrowed the choice to one between monetary targets and inflation targets since inflation targeting is the latest game in town it seems important to take stock of the experience of those newly independent central banks which have adopted it it is rather too soon to reach a definitive conclusion on the performance of inflation targeting central banks so what we consider are the lessons to be learnt from the mechanisms and structures that have been adopted by various inflation targeting central banks focusing in particular on the policies of the

informational content of government hogs and pigs reports we examine the value of the informational content of quarterly government reports which estimate forthcoming supplies of hogs and pigs it is assumed that a hypothetical futures trader obtains the government reports one day in advance of their release a futures market trading rule is established which uses early access to the reports together with a priori expectations of the reports contents we find the market information in the government reports is of little or no value to a futures trader in advance of the release date because this information is already incorporated in the futures price

do core inflation measures help forecast inflation abstract we conduct cointegration and granger causality tests for traditional and new measures of core inflation we find that both measures are consistent with desired properties of measures of underlying inflation but neither is very useful for forecasting purposes

was the deflation during the great depression anticipated evidence from the commodity futures market futures prices were well above spot prices for most commodities during most of the great depression evidently the spectacular declines in agricultural prices caught many people by surprise based on the historical correlations between commodity prices and consumer prices commodity markets anticipated stable consumer prices during the first year of the great depression the dramatic drop in nominal treasury bill yields thus should be read as a drop in ex ante real rates later in the great depression markets anticipated deflation but not as severe as actually occurred copyright 1992 by american economic association

market efficiency in agricultural futures markets market efficiency and unbiasedness are tested in four agricultural commodity futures markets live cattle hogs corn and soybean meal using cointegration and error correction models with gqarch in mean processes results indicate each market is unbiased in the long run although cattle hogs and corn futures markets exhibit short run inefficiencies and pricing biases models for cattle and corn outperform futures prices in out of sample forecasting results also suggest short run time varying risk premiums in cattle and hog futures markets

using usda forecasts to estimate the price flexibility of demand for agricultural commodities we estimate the general equilibrium price flexibility of demand for corn and soybeans using monthly changes in expected supply published by the usda our estimates reflect the demand response to a one year supply shock and thus correspond to the inverse demand elasticity we derive the conditions under which our estimates are consistent and we show how demand flexibility varies by season inventory time horizon and demand composition at average inventory and without accounting for corn ethanol use we obtain price flexibility estimates of 1 35 and 1 03 for corn and soybeans respectively current corn ethanol production levels are associated with much larger absolute flexibilities for both commodities copyright 2012 oxford university press

pre harvest price expectations for corn the information content of usda reports and new crop futures this article examines the puzzle of why futures prices continue to react to usda crop reports despite the fact that reports appear to be no longer newsworthy that is provide no better production estimates than private forecasts the information value of reports is measured in terms of their influence on rational agents harvest time corn price expectations which are uncovered using a hamilton type modeling approach results show that reports are still newsworthy as they would contribute to agents price expectations if released a day early thus futures price reactions which closely reflect price expectations are rational and consistent with efficient markets hypothesis copyright 2008 oxford university press

the reaction of live hog futures prices to usda hogs and pigs reports strong concerns about how efficiently live hog futures prices react to u s department of agriculture hogs and pigs reports have been raised by livestock producer groups using market survey data direct tests of the efficient markets hypothesis are performed for the live hog futures market two limit tobit models account for institutional price limits results support the efficient market hypothesis in that live hog futures prices a do not react to anticipated changes in reported information b do react significantly and in the expected direction to unanticipated changes in reported information and c generally adjust to unanticipated information on the day following release of the reports

understanding the disinflations in australia canada and new zealand using evidence from smooth transition analysis abstract this paper investigates the disinflation experiences of three countries australia canada and new zealand unlike previous approaches which have sought to use institutional data to pre determine the causes speed and duration of the transitions to low inflation regimes this paper allows price data itself to determine the speed and timing of the reforms using smooth transition analysis the results show that the process of transition is related to two factors central bank independence and the general slowdown in economic activity which occurred during the early 1990s in all oecd countries other reforms to the labor market and fiscal policy were less influential

intraday market effects in electronic soybean futures market during non trading and trading hour announcements abstractthis article investigates market reactions to major united states department of agriculture announcements during non trading and trading hours in the soybean futures market using microstruc

inflation forecasts and monetary policy proposals for inflation targeting as a strategy for monetary policy leave open the important operational question of how to determine whether current policies are consistent with the long run inflation target an interesting possibility is that the central bank might target current private sector forecasts of inflation either those made explicitly by professional forecasters or those implicit in asset prices we address the issue of existence and uniqueness of rational expectations equilibria when the central bank uses private sector forecasts as a guide to policy actions in a dynamic model which incorporates both sluggish price adjustment and shocks to aggregate demand and aggregate supply we show that strict targeting of inflation forecasts is typically inconsistent with the existence of rational expectations equilibrium and that policies approximating strict inflation forecast targeting are likely to have undesirable properties we also show that economies with more general forecast based policy rules are particularly susceptible to indeterminacy of rational expectations equilibria we conclude that although private sector forecasts may contain information useful to the central bank ultimately the monetary authorities must rely on an explicit structural model of the economy to guide their policy decisions this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item

monetary and exchange rate policies for international financial stability a proposal w v ithout a common monetary standard the remarkable integration of western european north american and the industrialized asian economies in both commodity trade and financial flows is less efficient and becoming untenable dissatisfaction with wildly fluctuating relative currency values euphemistically called floating or flexible exchange rates is a prime cause of the resurgence in protectionism in 1986 87 the overvalued yen forced japanese industrialists to close factories retire workers and write off once valuable investments in plant and equipment this parallels what their american counterparts were forced to do between 1981 and 1985 when the dollar suddenly became overvalued similarly the paring down of the british manufacturing base was precipitated when the pound unexpectedly became a strong petrocurrency in 1979 81 in agriculture japan and european countries are determined to insulate their domestic prices of farm products from unsettling international influences including volatile fluctuations in the yen dollar or mark dollar exchange rates thus unless exchange stability is first achieved the american government s attempt to broaden the general agreement on tariffs and trade to encompass agriculture and services is likely to fail but what keeps the three major industrial blocs from developing a common monetary standard to prevent exchange rate fluctuations although many people

taxes and stimuli of investment under uncertainty this article considers the effect on an irreversible investment of a subsidy to investment in combination with a taxation of future profits it is shown that such a combination raising a zero expected revenue decreases the trigger value of investment the tax rate for which the stimulus works at zero expected cost decreases as heterogeneity in the group of investors increases the importance of the result is exemplified by the graduate tax

the behavior of bid ask spreads in the electronically traded corn futures market this is the first paper to analyze liquidity costs in agricultural futures markets based on the observed bid ask spread bas faced by market participants the results reveal a highly liquid corn market that mostly offers order execution at minimum cost the bas responds negatively to volume and positively to price volatility but also affects volume traded and price volatility while statistically significant these responses on a cents bushel or a percentage basis are generally small liquidity costs are also virtually impervious to short term changes in demand for spreading and trend following trader activity as well as differences from day of the week changes in market activity much larger cents bushel and percentage changes in bas occur during commodity index trader roll periods and on usda report release days the roll period findings indicate a sunshine trading effect while announcement effects identify the importance of unexpected information and adverse selection on order execution costs overall our research demonstrates that the transition to electronic trading in the corn futures market has led to low and stable liquidity costs despite the market turbulence in 2008 2009

the value of public information in commodity futures markets abstract the informational value of u s department of agriculture usda corn and soybean production forecasts is investigated for the period 1971 1992 three tests of informational content are applied overall the results suggest usda corn and soybean forecasts provide valuable information to participants in commodity futures markets this value does appear to have declined especially since the mid 1980s

quantifying the wasde announcement effect this article uses a two stage gls model to quantify the world agricultural supply and demand estimates wasde announcement effect for cotton soybeans and hard winter wheat controlling for important factors associated with commodity price volatility the information presented by the overlapping nature of futures contracts is exploited to estimate conditional effects by month inventory conditions and delivery horizon results in this article show that the wasde announcement effect persists across contract positions is not limited to months that include nass crop survey data is amplified during low carryover periods for soybeans and wheat and is rapidly incorporated into futures prices

end user preferences for usda market information abstract buyers and sellers of agricultural commodities benefit from public provision of information in decision making processes the purpose of this study is to improve understanding of current preferences for public agricultural information results indicate preference for farm level reports by extension agents and leading economic indicators by agribusiness or market analysts implications are outlined for ongoing discussions regarding maintenance of public investment in an era of tightening u s federal budgets

are harvest forecasts news usda announcements and futures market reactions futures market price data for maize and soyabeans are used to examine reactions to us department of agriculture harvest forecasts these forecasts are widely known and reasonably accurate so failure to find significant reaction would indicate that the usda did not contribute additional news relative to information already possessed by traders various t tests f tests and nonparametric chi square tests indicate rejection of the null hypothesis of no significant difference between means of absolute values or variances of changes in closing prices on days following a usda announcement and other days thus the data indicate that significant information is contained in the forecasts

when do the usda forecasters make mistakes this study analysed forecasts for all us corn soya bean and wheat categories published within the world agricultural supply and demand estimates wasde reports over the 1987 88 through 2009 10 marketing years in an attempt to identify patterns and better understand when the usda forecasters make mistakes two general sources of errors were investigated behavioural and macroeconomic factors the first objective was to examine how these factors affect the size of the forecast error and the second concentrated on the direction of the error due to these effects our findings suggest that the largest increase in the size of usda forecast errors was associated with structural changes in commodity markets that took place in the mid 2000s corn soya bean and wheat forecast errors also grew during the periods of economic growth and with changes in exchange rates while inflation and changes in oil price had a much smaller impact with respect to behavioural sources we identified patterns consistent with leni

quasi rational and ex ante price expectations in commodity supply models an empirical analysis of the us broiler market a statistically optimal inference about agents ex ante price expectations within the us broiler market is derived using futures prices of related commodities along with a quasi rational forecasting regression equation the modelling approach which builds on a hamilton type framework includes endogenous production and allows expected cash price to be decomposed into anticipated and unanticipated components we therefore infer the relative importance of various informational sources in expectation formation results show that in addition to the quasi rational forecast the true supply shock future prices and ex post commodity price forecast errors have at times been influential in broiler producers price expectations copyright 2003 john wiley sons ltd

the impact of public and semi public information on cotton futures market abstractthis study estimated the impact of all major public and semi public reports on the cotton futures market from 1995 through 2012 the estimation was based on the event study approach with the events measured by the release of five major reports export sales crop progress world agricultural supply and demand estimates wasde and prospective plantings public reports from us department of agriculture and cotton this month semi public report from international cotton advisory committee the best fitting igarch 1 1 t model that accounted for the day of week seasonality and stock levels was used to measure the report effects on daily nearby cotton close to close futures returns prospective plantings and wasde reports appeared to be the most important sources of information in the cotton markets moving the conditional standard deviation of returns by an average of 14 4 and 9 6 percentage points respectively however significant market reaction was not found for the other three reports our an

are revisions to usda crop production forecasts smoothed this article uses nordhaus framework to determine the efficiency of the revision process for usda corn and soybean production forecasts over the 1970 1971 through 2004 2005 marketing years positive autocorrelation and consistency of directional changes in forecast revisions suggest these forecasts are smoothed evidence is provided that the loss in forecast accuracy due to smoothing is statistically and economically significant in several cases a conservative bias in farm operators assessments of yield potential and in the procedure for translating enumerator s information about plant fruit counts into objective yield estimates are identified as plausible sources of smoothing

the rationality of usda forecasts under multivariate asymmetric loss a large number of previous studies suggest that many usda forecasts are biased and or inefficient these findings however may be the result of the assumed loss function of usda forecasters we test the rationality of the usda net cash income forecasts and the wasde production and price forecasts between 1988 and 2018 using a flexible multivariate loss function that allows for asymmetric loss and non separable forecast errors our results provide robust evidence that usda forecasters are rational expected loss minimizers yet demonstrate a tendency to place a greater weight on under or overprediction as a result this study provides an alternate interpretation of previous findings of forecast irrationality

what should central banks do what should be their macroeconomic objectives and operations before turning to the normative question of what central banks hereafter cbs should do we need to deal with the contentious issue of what cbs actually can do in the field of monetary control one might think that this should be a relatively straightforward matter of fact instead there is a yawning chasm of mutual misunderstanding which has persisted for decades between economists and those working in cbs which has bedevilled the subject virtually every monetary economist believes that the cb can control the monetary base hereafter mo and subject to errors in predicting the monetary multiplier the broader monetary aggregates as well after all mo apart from some relatively unimportant qualifications about coins from the mint represents the liabilities of the cb and the cb should be able to control its own liabilities by open market operations hence the normal assumption is that mo is controllable within a narrow margin if the central bank should fail to do so it must be because it has chosen some alternative operational guide for its open market operations e g holding interest rates constant at some level which operational rule is frequently decried as sub optimal assuming that cbs can almost perfectly control mo economists have constructed several simulated schemes of how an optimal rule for so doing might be set up mccallum i993a b provides good recent examples almost all those who have worked in a cb believe that this view is totally mistaken in particular it ignores the implications of several of the crucial institutional features of a modern commercial banking system notably the need for unchallengeable convertibility at par between currency and deposits and secondly that commercial bank reserves at the cb receive a zero or belowmarket rate of interest the first means that fluctuations in the public s demand for cash which are both strongly seasonal and somewhat unpredictable must be accommodated the second means that commercial banks will not willingly hold free reserves at the end of each day assuming for this purpose that a stated reserve ratio has to be held on each day rather than averaged over say a couple of weeks beyond that needed to meet late fluctuations in the demand for cash after the money market has closed or become thin only if interest rates fall to the very low levels of the i930s and or risks of interest rate variability or late in the day cash runs increase would commercial banks increase their desired free reserves thus given the

inventory shocks and the oil ethanol grain price nexus we analyze the effects of oil and grain inventory data releases on oil ethanol corn and soy futures prices oil and grain inventory shocks are identified as the percent difference between actual inventory levels and median predictions from a survey of forecasters ethanol futures prices alone are found to respond to both oil and grain inventory shocks other energy futures prices respond only to oil inventory shocks while agricultural commodity futures prices respond only to grain inventory shocks