some empirical evidence on the effects of shocks to monetary policy on exchange rates this paper investigates the effects of shocks to u s monetary policy on exchange rates we consider three measures of these shocks orthogonalized shocks to the federal funds rate orthogonalized shocks to the ratio of nonborrowed to total reserves and changes in the romer and romer index of monetary policy in sharp contrast to the literature we find substantial evidence of a link between monetary policy and exchange rates specifically according to our results a contractionary shock to u s monetary policy leads to i persistent significant appreciations in u s nominal and real exchange rates and ii significant persistent deviations from uncovered interest rate parity in favor of u s interest rates

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

predictability in financial markets what do survey expectations tell us abstract there is widespread evidence of excess return predictability in financial markets for the foreign exchange market a number of studies have documented that the predictability of excess returns is closely related to the predictability of expectational errors of excess returns in this paper we investigate the link between the predictability of excess returns and expectational errors in a much broader set of financial markets using data on survey expectations of market participants in the stock market the foreign exchange market the bond market and money markets in various countries the results are striking first in markets where there is significant excess return predictability expectational errors of excess returns are predictable as well with the same sign and often even with similar magnitude this is the case for foreign exchange stock and bond markets second in the only market where excess returns are generally not predictable the money market expectational errors are not predictable either these findings suggest that an explanation for the predictability of excess returns must be closely linked to an explanation for the predictability of expectational errors

the value of operational flexibility in the presence of input and output price uncertainties with oil refining applications refining is indispensable to almost every natural resource based commodity industry it involves a series of complex processes that transform inputs with a wide range of quality characteristics into refined finished products sold to end markets in this paper we take the perspective of a profit maximizing refiner that considers upgrading its existing simple refinery to include intermediate conversion flexibility i e the capability of converting heavy intermediate components to light ones we present a stylized two stage stochastic programming model of a petroleum refinery to investigate the value drivers of conversion flexibility and the impact of input and output market conditions on its economic potential conversion flexibility adds value to refineries by either transforming a nonprofitable situation into a profitable one referred to as purchase benefit or improving profitability of an already profitable situation referred to as unit revenue benefit in a real data calibrated numerical study w

dynamic steam coal market integration evidence from rolling cointegration analysis abstract the aim of the paper is twofold first to assess the dynamics of the integration process of the international steam coal prices and second to investigate the changes in the roles of particular coal prices in this market in the light of changes in the structure of supply and demand the analysis is based on steam coal prices set by the largest world exporters and importers on both the atlantic and the pacific markets we use weekly data spanning from october 5 2001 to march 28 2014 the aim is achieved in two stages during the first one we use the rolling trace test to identify the integration of the steam coal market and during the second one we apply the rolling weak exogeneity test to determine the roles of the participants of the international steam coal market namely price setters and price takers our main findings can be summarized in two observations firstly the main world steam coal prices are integrated and during the period when freight costs are higher the coal market integration is weaker and when the costs are lower the integration is stronger secondly the role of particular coal prices is not stable in time generally price setters appear in the market which covers greater shares in the physical coal trade although indonesia and russia have a great share in the global export their prices remain price takers during the whole period as a consequence although russia remains the largest coal exporter of the steam coal to the european market it cannot dictate its prices in this market

interest rates and the subjective probability distribution of inflation forecasts the interst rate effects of the first four moments of the subjective probability distribution of inflation forecasts from the asa nber survey are examined over the period 1968 4 1985 4 using tre asury bill yields as the nominal rate variable in the context of a re duced form fisher equation the authors find that inflation uncertain ty as measured by the average variance of the probability distributi ons of inflation forecasts to be insignificant however the average skewness and kurtosis variables which result from these probability distributions do significantly affect interest rates they interpret these effects as accounting for the level of risk or uncertainty abou t future inflation copyright 1988 by ohio state university press

oil and the macroeconomy since world war ii all but one of the u s recessions since world war ii have been preceded typically with a lag of around three fourths of a year by a dramatic increase in the price of crude petroleum this does not mean that oil shocks caused these recessions evidence is presented however that even over the period 1948 72 this correlation is statistically significant and nonspurious supporting the proposition that oil shocks were a contributing factor in at least some of the u s recessions prior to 1972 by extension energy price increases may account for much of post opec macroeconomic performance

monetary policy and food inflation in south africa a quantile regression analysis abstract although optimal monetary policy stabilizes food inflation theoretically empirical studies remain limited not only in the context of volumes and the estimation approaches but are focused on selected advanced and emerging countries to the neglect of africa where poverty and dominance of food in the consumption basket are more pronounced we provide empirical evidence in the context of south africa using quantile regressions rising food prices are destabilized even further by restrictive monetary policy a finding that has ramifications for inflation targeting especially given that a quarter of the country s population is food poor

exogenous shocks and the spillover effects between uncertainty and oil price this paper evaluates the information spillover between equity related uncertainty and the oil price before and after the 2008 global financial crisis and the effects of exogenous shocks on the pattern of information spillover in particular we investigate mean and volatility spillovers between uncertainty and the oil price with and without exogenous shocks by using a bivariate egarch model there are two main findings in our paper first the evidence ensures significant information transmission between equity related uncertainty and the oil price and shows remarkable differences in transmission patterns before and after the crisis second the results show that exogenous shocks can intensify information transmission between oil prices and uncertainty in terms of both the mean and volatility spillover effects moreover exogenous shocks exhibit direct spillover effects on oil prices

relationship between the oil price volatility and sectoral stock markets in oil exporting economies evidence from wavelet nonlinear denoised based quantile and granger causality analysis abstract this paper examines the extent of volatility between oil price and sectoral indices in the gulf cooperation council gcc countries by using quantile regression analysis qra for the return s series and denoised series over the period 2006 2017 four sectors are found to offer diversification opportunities during a high market i e 90th quantile all the sectors are found interdependent of oil price volatility however the bank and insurance sectors are insusceptible to oil price volatility during the 10th 25th and 75th quantiles in addition qra results for wavelet nonlinear denoising with a soft thresholding series indicate that all the sectors are interdependent of oil price volatility but that the aggregate market index transport and telecommunication sectors are insensitive to oil price volatility during the 75th and 90th quantiles this highlights the usefulness of denoising the financial returns series when applying regression tools moreover the contagion and interdependence between the oil price and stock returns sectors are estimated by frequency domain causality

the relationship between oil prices and exchange rates revisiting theory and evidence abstract this paper reviews existing theoretical and empirical research on the relationship between oil prices and exchange rates we start with theoretical transmission channels which point to bi directional causality empirical research is classified and shows that the evidence varies substantially depending on sample country choice and empirical method yet there are some common patterns i strong links between exchange rates and oil prices are frequently observed over the long run and ii either exchange rates or oil prices are a potentially useful predictor of the other variable in the short run but the effects are strongly time varying we also identify some important avenues for future research

commodity currencies and the real exchange rate abstract this paper examines whether the real exchange rates of commodity exporting countries and the real prices of their commodity exports move together over time using international monetary fund imf data on the world prices of 44 commodities and national commodity export shares we construct new monthly indices of national commodity export prices for 58 commodity exporting countries over 1980 2002 evidence of a long run relationship between national real exchange rate and real commodity prices is found for about one third of the commodity exporting countries the long run real exchange rate of these commodity currencies is not constant as would be implied by purchasing power parity based models but is time varying being dependent on movements in the real price of commodity exports

do oil prices respond to real interest rates abstract we show that the robustness of an inverse relationship between the real interest rate and real oil price depends crucially on how the real interest rate is calculated and the time frame of the sample consistent with earlier studies we find that the oil price falls with an unexpected rise in either u s or international ex ante real interest rates when the ex post real interest rate is used the oil price only falls with rises to short term rates 3 months or less additionally the response of the oil price to long term ex ante real interest rates must include the period through the mid 2000s for the inverse relationship to appear in contrast the oil price consistently falls with unexpected rises in short term real interest rates throughout the entire sample we draw two conclusions from the results the first is that the oil price is consistently responsive to short term u s and international real interest rates underlying the importance of storage second oil prices have become more responsive to long term real interest rates over time

the price puzzle reconsidered abstract a large literature has employed structural vector autoregressive svar models to investigate the empirical effects of u s monetary policy many of these models regularly produce a price puzzle a rise in the aggregate price level in response to a contractionary innovation to monetary policy unless commodity prices are included conventional wisdom maintains that commodity prices resolve the price puzzle because they contain information that helps the federal reserve forecast inflation i examine a number of plausible alternative indicator variables and find little correlation between an ability to forecast inflation and an ability to resolve the price puzzle additionally a sub sample investigation reveals that evidence of a price puzzle is associated primarily with the 1959 1979 sample period and that most indicators including commodity prices cannot resolve the puzzle over this period

commodity prices interest rates and the dollar this paper sheds light on recent fluctuations in commodity prices we investigate whether a decline in real interest rates and the us dollar contributes to higher commodity prices and whether commodity prices display overshooting behavior in response to changes in real interest rates we analyze the behavior of real prices of crude oil food metals and industrial raw materials the analysis is based on structural var models estimated on quarterly data over the period 1990q1 2007q4 our results suggest that commodity prices increase significantly in response to reductions in real interest rates moreover oil prices and prices of industrial raw materials tend to display overshooting behavior in response to such interest rate changes the evidence also suggests that a weaker dollar leads to higher commodity prices shocks to interest rates and the dollar are found to account for substantial shares of fluctuations in commodity prices

commodity dynamics a sparse multi class approach abstract the correct understanding of commodity price dynamics can bring relevant improvements in terms of policy formulation both for developing and developed countries agricultural metal and energy commodity prices might depend on each other although we expect few important effects among the total number of possible ones some price effects among different commodities might still be substantial moreover the increasing integration of the world economy suggests that these effects should be comparable for different markets this paper introduces a sparse estimator of the multi class vector autoregressive model to detect common price effects between a large number of commodities for different markets or investment portfolios in a first application we consider agricultural metal and energy commodities for three different markets we show a large prevalence of effects involving metal commodities in the chinese and indian markets and the existence of asymmetric price effects in a second application we analyze commodity prices for five different investment portfolios and highlight the existence of important effects from energy to agricultural commodities the relevance of biofuels is hereby confirmed overall we find stronger similarities in commodity price effects among portfolios than among markets

pricing of long dated commodity derivatives do stochastic interest rates matter abstract does modelling stochastic interest rates beyond stochastic volatility improve pricing performance on long dated commodity derivatives to answer this question we consider futures price models for commodity derivatives that allow for stochastic volatility and stochastic interest rates and a correlation structure between the underlying variables we examine the empirical pricing performance of these models on pricing long dated crude oil derivatives estimating the model parameters from historical crude oil futures prices and option prices we find that stochastic interest rate models improve pricing performance on long dated crude oil derivatives when the interest rate volatility is relatively high furthermore increasing the model dimensionality does not tend to improve the pricing performance on long dated crude oil option prices but it matters for long dated futures prices we also find empirical evidence for a negative correlation between crude oil futures prices and interest rates that contributes to improving fit to long dated crude oil option prices

competitive storage and commodity price dynamics by buying cheap and selling dear risk neutral commodity speculators can smooth commodity prices and induce serial dependence in price even when none would exist under a simple process of supply and demand commodity prices are variable and strongly positively correlated from one year to the next the variability is often explained by supply factors and the autocorrelation by the activities of speculators we show that this explanation is not consistent with the evidence speculation can substantially increase autocorrelation for prices that are weakly autocorrelated in its absence but not to the high levels that are observed in the data

the multilateral relationship between oil and g10 currencies abstract the relationship between oil and currencies is expected to be multilateral in nature however the use of the us dollar price of oil to measure this relationship can suffer from aggregation bias which is caused by the well known numeraire effect the quotation of oil in us dollars in this paper we remove the numeraire effect from the us dollar price of oil by creating a global multilateral price of oil which is quoted relative to multiple currencies this allows us to estimate an unbiased multilateral relationship between oil and g10 currencies we find that the global price of oil moves multilaterally with a group of oil currencies the norwegian krone the australian dollar the canadian dollar and the british pound in contrast the japanese yen and the swiss franc move multilaterally against the group of oil currencies and not against the global price of oil

global factors uncertainty weather conditions and energy prices on the drivers of the duration of commodity price cycle phases abstract we investigate the role of global factors in explaining the length of commodity price cycle phases using a continuous time weibull duration model and data for a panel of 33 countries over the period 1980q1 2015q4 we find evidence of increasing constant positive duration dependence for commodity price booms and busts normal time spells global macroeconomic conditions in particular inflation economic policy uncertainty and monetary policy actions significantly affect the duration of all commodity price cycle phases global environmental conditions also impact the duration of commodity price booms with a rise in average temperature rainfall increasing reducing their length a rise in the number of military conflicts around the globe is associated with shorter booms and busts finally we find that a rise in oil prices is linked with longer booms and shorter busts

2014 oil plunge causes and impacts on renewable energy abstract following four years of relative stability at around 106 per barrel bbl oil prices have declined sharply since june 2014 and are expected to remain low for a considerable period of time there are multiple factors which are being considered behind the plunge in the price of oil since june 2014 most observers have conjectured that domestic oil boom in the united states and iraq is the major cause for the falling oil prices some have suggested that a major shock to oil price expectations occurred after the november 2014 meeting of opec when they did not cut production despite the steady increase in non opec oil production in this paper first we analyzed the effect of various factors on the oil prices and then we studied impacts of the falling oil prices on non hydro renewable energy we compare the recent decline in oil prices with previous episodes up to 1996 we show that the demand and supply formula cannot be implemented to the current oil plunge the study shows that so far the recent plunge in oil prices has produced no major impact on renewable energy sector we found that renewable energies such as solar and wind are increasingly becoming cost competitive with fossil fuel energy however the oil price crash could hurt the short term outlook for certain specific clean energy technologies such as bio fuel and electric vehicles that do compete with oil based transportation while long term low oil prices may threaten renewable energies climate policies have the potential to act as a counterweight encouraging long term low carbon investment

expectations and commodity price dynamics the overshooting model monetary policy has important effects on agricultural commodity prices because though they are flexible other goods prices are sticky this paper formalizes the argument by applying the dornbusch overshooting model a decline in the nominal money supply is a decline in the real money supply in the short run it raises the real interest rate which depresses real commodity prices they overshoot their new equilibrium in order to generate an expectation of future appreciation sufficient to offset the higher interest rate these real effects which vanish in the long run also result from a decline in the money growth rate

precious metals oil and the exchange rate contemporaneous spillovers abstractwe investigate the contemporaneous spillovers among precious metals crude oil and the us exchange rate we contend that conventional reduced form vector autoregressive var models based on lead lag relations do not fully capture the interactions among these series as these models ignore the contemporaneous effects using a structural var model we identify these contemporaneous spillovers which are shown to be strong and asymmetric we further show that not taking into consideration the contemporaneous interactions among these assets leads to inaccurate findings and inevitably to inaccurate interpretations of the causal relations among them