a semiparametric approach to short term oil price forecasting abstract in this paper it is shown how the garch properties of oil price changes can be employed to forecast the oil price distribution over short term horizons the forecasting methodology is semiparametric and it is based on the bootstrap approach the results of an out of sample forecasting exercise carried out using the brent oil price series suggest that the forecasting approach can be used to obtain a performance measure for the forward price in addition to compute interval forecasts for the oil price

the 1985 86 oil price collapse and afterwards what does game theory add this paper focuses on the strategies used by opec to generate cartel profits over the period 1983 90 the evidence supports the hypothesis that opec adopted a swing producer strategy from 1983 to 1985 but when saudi arabia s profits fell below the level of coumot profits in the summer of 1985 it abandoned the role of swing producer driving prices to the cournot level subsequently saudi arabia appears to have adopted a tit for tat strategy designed to punish excessive cheating by other opec members based on these findings the strengths and limitations of game theory are assessed

oil price volatility and stock price fluctuations in an emerging market evidence from south korea abstract how important are oil price fluctuations and oil price volatility on equity market performance what are the policy implications if volatility turns out to be significant we assess this issue in an economics finance nexus for korea using a vec model including interest rates economic activity real stock returns real oil prices and oil price volatility our main aim is to capture the effects of crude oil prices on the korean economy thoroughly covering the period of the asian financial crisis of 1997 which heavily affected the country and the oil price hikes in the early 1990s after the gulf war south korea was the country most hit by the financial crisis together with indonesia and thailand results indicate the dominance of oil price volatility on real stock returns and emphasize how this has increased over time oil price volatility can have profound effect on the time horizon of investment and firms need adjust their risk management procedures accordingly this increase in dependency has been found in other net oil importing emerging equity markets we test the relationship between oil price movements and economic activity by using modern time series techniques in a cointegrating framework we expand the standard error correction model by examining the dynamics of out of sample causality through the generalized variance decomposition and impulse response function techniques the evidence from persistence profiles also gives important guidelines based on how fast the entire system adjusts back to equilibrium in addition we find the cointegrating relationship to be stable and find that the linear error correction model to be more favorable than an asymmetric 2 period markov switching model

on agreements in a nonrenewable resource market a cooperative differential game approach abstract we consider a nonrenewable resource duopoly with economic exhaustion we characterize the set of pareto efficient equilibria we show that when firms are sufficiently patient there exists no pareto efficient agreement that yields short run gains with respect to the noncooperative equilibrium given a pair of stocks there exists a unique interior pareto efficient agreement we characterize the set of stocks where a pareto efficient agreement results in larger discounted sum of profits for both players we show that social welfare under the interior pareto efficient agreement is smaller than under non cooperation despite the gains from a more cost effective extraction of the resources under an agreement

disagreement in bargaining an empirical analysis of opec abstract we consider a stylised model in which two cartel members bargain over the aggregate production quota in a world of asymmetric information we show that when the two cartel members are sufficiently different the probability of agreement depends on both the current state of demand and initial production specifically the probability of agreement is much lower when demand is low and initial production is relatively high than when demand is high and initial production is relatively low we also find that regardless of the current demand state the more extreme is initial production the higher is the probability of agreement using an event study where we take as events opec production quota announcements we demonstrate empirically that the predictions of the model are borne out

international evidence on crude oil price dynamics applications of arima garch models abstract we examine the usefulness of several arima garch models for modeling and forecasting the conditional mean and volatility of weekly crude oil spot prices in eleven international markets over the 1 2 1997 10 3 2009 period in particular we investigate the out of sample forecasting performance of four volatility models garch egarch and aparch and figarch over january 2009 to october 2009 forecasting results are somewhat mixed but in most cases the aparch model outperforms the others also conditional standard deviation captures the volatility in oil returns better than the traditional conditional variance finally shocks to conditional volatility dissipate at an exponential rate which is consistent with the covariance stationary garch models than the slow hyperbolic rate implied by the figarch alternative

a model of the crude oil market in which market conduct varies this paper describes a model which first identifies in an estimatable manner parameters which describe the conduct each decision maker in an oligopoly expects from it s rivals and then allows them to vary in a systematic fashion across rivals and over time the model is applied to ten producing countries in the crude oil market 1966i to 1981iii a fully dynamic demand system is estimated together with equations describing price choice and variations in conduct and the null hypothesis of constant conduct is rejected against the more general alternative proposed here copyright 1987 by royal economic society

federal budget projections a nonparametric assessment of bias and efficiency as an important initial step in the annual budget process the president presents to congress each january his budget with details of federal spending activity and priorities our paper is a statistical assessment of the merit of the budget figures submitted to congress we investigate the overall budget as well as several important specific accounts an important aspect of our paper is the introduction of a nonparametric methodology which incorporates exact tests for assessing the unbiasedness and the internal and external consistency of forecasts the empirical evidence shows that the nonparametric results confirm the presence of bias in forecasts on the outlay side suggested by regression results but tends to find fewer series exhibiting bias on the revenue side on the other hand the nonparametric approach lends greater support to the conclusion that the government s budget projections do not fully exploit available information copyright 1995 by mit press

a test of the opec cartel hypothesis 1974 1983 this paper tests whether the higher oil prices fo the last decade could have been the result of producer collusion we find little evidence that opec influenced oil prices during the years of skyrocketing prices 1974 1980 but there is evidence that it did so during the recent years of softening prices 1981 1983

monetary policy rules macroeconomic stability and inflation a view from the trenches i estimate a forward looking monetary policy reaction function for the federal reserve for the periods before and after paul volcker s appointment as chairman in 1979 using information that was available to the fomc in real time from 1966 to 1995 the results suggest broad similarities in policy and point to a forward looking approach to policy consistent with a strong reaction to inflation forecasts during both periods this contradicts the hypothesis based on analysis with ex post constructed data that the instability of the great inflation was the result of weak fomc policy responses to expected inflation a difference is that prior to volcker s appointment policy was too activist in reacting to perceived output gaps that retrospectively proved overambitious drawing on contemporaneous accounts of fomc policy i discuss the implications of the findings for alternative explanations of the great inflation and the improvement in macroeconomic stability since then

testing for indeterminacy an application to u s monetary policy reply this paper considers a prototypical new keynesian model in which the equilibrium is undetermined if monetary policy is passive the likelihood based estimation of dynamic equilibrium models is extended to allow for indeterminacies and sunspot fluctuations we construct posterior weights for the determinacy and indeterminacy region of the parameter space and estimates for the propagation of fundamental and sunspot shocks according to the estimated model u s monetary policy post 1982 is consistent with determinacy whereas the pre volcker policy is not we find that before 1979 indeterminacy substantially altered the propagation of shocks

imperfect competition in the international energy market a computerized nash cournot model this paper describes the conceptual structure properties and solution approach of a computerized model of the international energy market the model treats energy producers as players in a multistage noncooperative game the goal of each player or cartel of players is assumed to be maximization of discounted profit subject to technical political and resource constraints the model calculates that collection of intertemporal extraction and price paths from which a player can unilaterally deviate only at a loss the open loop nash equilibrium the model integrates the theory of exhaustible resources due to hotelling and the theory of oligopoly due to nash and cournot although useful as a teaching device to illustrate theoretical results its main function is to facilitate analysis of real world resource problems the model is flexible allowing the user to specify not only cost demand and reserve information but also assumptions about who belongs to what coalition two shortcomings deserve note t

the energy intensity of transition countries the economies of central and eastern europe and the former soviet union have traditionally been very energy intensive energy intensity defined as energy use per gdp has decreased in the course of transition but progress has been uneven and most transition countries still use several times as much energy per unit of output as their western peers this paper decomposes energy data to identify the main factors behind the improvements in energy intensity it shows that energy prices and progress in enterprise restructuring are the two most important drivers for more efficient energy use

the evolution of hard coal trade in the pacific market abstract this article analyses the evolution of hard coal trade in the asia pacific region known as the pacific market from the 1980s to the present years it investigates the development of the trade pattern the nature of contracts the price setting the supply demand and the future of trade over the last two decades the international trade in the pacific market has achieved dramatic increases in coal commerce this achievement is due to strong demand in japan and north east asian countries and progressive coal export in australia and indonesia it is likely that this market will continue to expand and become a more important market in replacing the atlantic market in this market historically long term supply contracts were usual and concluded between producer and consumer even recently there are still annual contracts but with a small number of deals in contrast spot transactions are now becoming more important previously japan had been influential in price setting by establishing a benchmark price with australian coal suppliers afterward a reference price was becoming a trend nowadays spot price indices such as the barlow jonker the barlow jonker acr and globalcoal have become important to set the price the pacific market growth is not without problems the exporter countries particularly australia and indonesia have some challenges that if they are not resolved at present it would implicate the performance of the coal trade

the non linear impact of oil price on the oil demand a panel smooth transition regression model was adopted to analyse the non linear impact of oil prices on oil demand data for 42 countries was obtained from the international energy agency for the

a new way of measuring the wti brent spread globalization shock persistence and common trends abstract the standard cointegration and the persistence of the spread of the brent wti price have been widely analyzed however no studies have been able to present evidence of both issues jointly so far a novel focus is presented in this paper from the application of the fractionally cointegrated vector autoregressive fcvar approach which allows the rigidity of the standard cointegration to be solved as result of the application of the fcvar model we identify several degrees of globalization by analyzing the order of integration of the error correction term indeed by using permanent transitory decomposition analysis we present what drives the relationship between both oil crude prices information the findings shown here reveal that the brent wti market is strongly globalized nevertheless the brent wti price spread follows a long memory process and the brent drives the brent wti price structure these results sustain some corollaries on economic policies for economic agents policy makers and business operators

an empirical analysis of the dynamic programming model of stockpile acquisition strategies for china s strategic petroleum reserve abstract the world s future oil price is affected by many factors the challenge therefore is how to select optimal stockpile acquisition strategies to minimize the cost of maintaining a reserve this paper provides a new method for analyzing this problem using an uncertain dynamic programming model to analyze stockpile acquisition strategies for strategic petroleum reserve using this model we quantify the impact of uncertain world oil price on optimal stockpile acquisition strategies of china s strategic petroleum reserve for the period 2007 2010 and 2011 2020 our results show that the future stockpile acquisition is related to oil prices and their probability and if not considering the occurrence of oil supply shortage china should at least purchase 25 million barrels when world oil price is at an optimal level the optimal price of stockpile acquisition of every year has a stronger relationship with the probability of high price and the optimal expected price and size of stockpile acquisition is different in each year

trends and contagion in wti and brent crude oil spot and futures markets the role of opec in the last decade abstract this article examines the interconnectedness of wti and brent prices on different resolutions of price movements firstly within a multivariate bekk framework we identify high but volatile correlations with recurring highs around 0 8 and multiple periods of decoupling opec meetings increase the correlation in the short run secondly linear l1 trends reveal that long term movements of wti and brent are driven by the same dynamics confirming the one great pool hypothesis opec meetings have only little impact on long term price trends thirdly we find leading effects of wti over brent by short term trends of several days especially in a negative direction these trends have an asymmetrical effect on volatility negative trends cause a stronger increase than positive trends these findings are of interest to policy makers as well as hedging strategies of crude oil portfolios and provide insight into long term movements of crude prices

agreement matters opec announcement effects on wti term structure abstract we investigate the relationships between different types of opec announcements and term structure variables level slope and curvature for wti crude oil futures we find that agreements to increase decrease production are positively negatively associated with changes in oil price levels in futures markets this finding is consistent with recent research for the first time in the literature we evaluate announcements which signify no change in production quotas in particular a no change announcement may be due to a unanimous agreement to maintain quotas unchanged or it may be due to a failure to agree on a change in quotas we find the term structure effects on slope and curvature of the two types of announcement to be statistically significantly different from each other our results suggest that markets are more optimistic following agreements to maintain production and more cautious following a failure to agree

the behaviour of energy related volatility indices around scheduled news announcements implications for variance swap investments abstract this paper investigates the effect of scheduled news announcements on two energy related volatility indices calculated by the chicago board of options exchange these volatility indices are the crude oil volatility index ovx and the energy sector volatility index vxxle which measure the market s expectation of 30 day volatility of crude oil prices and energy sector returns respectively we find that energy related volatility indices tend to fall following several us macroeconomic news releases and opec meetings put differently these news releases resolve investors uncertainty about the future development of energy related markets our results also suggest that macroeconomic releases and oil related events do not seem to exert significantly different impacts on energy market uncertainty we further document that the observed announcement day patterns cannot be exploited to generate significant returns using variance swaps once we incorporate transaction costs our findings are relevant because there are currently no other volatility derivatives traded in exchange markets such as options or futures that offer investors pure exposure to energy related volatility alone as variance swaps do

monetary policy and the lost decade lessons from japan i investigate how monetary policy can avoid a deflationary slump when policy rates are near zero by studying interest rate policy during japan s lost decade estimation results suggest that the bank of japan s interest rate policy fits a conventional reaction function with an inflation target near 1 the disapointing economic performance thus seems primarily due to adverse economic shocks rather than extraordinary policy errors also counterfactual policy simulations suggest that simply raising the inflation target would not have substantially improved performance however price level targeting or combining a higher inflation target with an aggressive output response would have achieved superior stabilization results

inflation targeting and relative price variability what difference does inflation targeting make author affiliation chi young choi cychoi uta eduyoung se kim acknowledgment the authors are grateful to coeditor kent kimbrough and two anonymous referees for constructive comments that helped to improve this article the authors also wish to thank steve cecchetti kang liu shin ichi nishiyama margie tieslau taka tsuruga and the seminar participants at the academia sinica national chung cheng university national sun yat sen university national taiwan university texas tech university and the university of texas at arlington for helpful comments and vikas kakkar for providing cpi data for hong kong any remaining errors are the authors 1 introductionvariability in relative prices is known to be a major channel through which inflation can induce welfare costs by impeding an efficient allocation of resources in the economy consequently substantial effort has been devoted in the literature to examining the link between relative price variability rpv and aggregate inflation although much of the existing theoretical and empirical literature points to a positive monotonic relationship newer contributions suggest that the relationship between inflation and rpv is more complicated particularly in terms of its sensitivity to the inflation regime 1the primary purpose of this study is to investigate whether the connection between inflation and rpv is influenced in an important way by the monetary policy framework chosen by a central bank specifically this article focuses on exploring whether the adoption of an inflation targeting it framework exerts any significant impact on rpv as measured by the standard deviations of sectoral inflation rates relative to the aggregate rate since it was first implemented in new zealand more than two decades ago the popularity of it has spread with some twenty five countries worldwide implementing the framework to date freedman and laxton 2009 the literature is now replete with studies pointing to reductions in both the level and the volatility of inflation in countries that have adopted it e g mishkin and schmidt hebbel 2007 2 while studies of the impact of it on aggregate inflation performance are plentiful little attention has been paid to the impact of it on rpv the question of whether and indeed how it affects rpv is an important one for several reasons first exploring the potential connection between it and rpv is a worthwhile exercise given the popularity of it as a monetary framework and the centrality of rpv to the current generation of macromodels the importance of rpv is recognized in standard new keynesian dynamic stochastic general equilibrium dsge models where the variance of relative prices is viewed as a useful summary statistic as noted by amano ambler and rebei 2007 for example in dsge models the optimal rate of target inflation and the optimal variability of inflation relative to output depend on the quantitative effects of price dispersion on macroeconomic equilibrium second answering the question helps us identify the driving force behind the change in rpv distinguishing between it adoption itself and its subsequent impact on inflation if the relationship is monotonically positive as is often believed in the literature one should expect that it adoption would bring about a decline in rpv in the same way as it has led to a decline in inflation if the relationship is more complex however the effect of it adoption on reducing rpv may hinge on the change in inflation regimes after it adoption third our answer to the question also sheds additional light on the empirical evidence for the relative effectiveness of it across different stages of development while there is strong evidence that developing countries benefit more from it than industrial countries in combating inflation and its volatility e g petursson 2004 lin and ye 2009 we are aware of no empirical research that has assessed this issue with respect to rpv

opec news announcements effects on oil price expectation and volatility abstract several times a year opec hosts conferences among its members to agree on further oil production policies prior to opec conferences there is usually rampant speculation about which decision concerning world oil production levels no change increase or cut will be announced the purpose of our investigation is to assess the impact of opec announcements on expectation and volatility of daily oil price changes returns we modify dummy variables indicating the day of an opec announcement to reflect a certain pattern of impact on return expectation and volatility a combination of regression and garch models can then differentiate between pre and post announcement effects and distinguish between the three kinds of opec decisions we find evidence for a post announcement effect on expectation which is negative in the case of a cut decision and positive in case of an increase or maintain decision while there is a positive pre announcement effect on volatility which is strongest in the case of a cut decision

what determines china s crude oil importing trade patterns empirical evidences from 55 countries between 1992 and 2015 abstract this study develops a conceptual framework that synthesizes the supply demand price and openness of crude oil trade along with a list of traditional economic political and geographical factors to investigate the determinants of crude oil imports in emerging markets we test the framework using china s crude oil imports from 55 countries for the period from 1992 to 2015 using both static and dynamic panel data models we find that china s crude oil import is associated with exporting country s supply demand and price as well as its bilateral trade relationships these factors were found to affect china s import of crude oil from the middle east however only bilateral trade relationships affect its imports of crude oil from the asia pacific furthermore we do not find substantial evidence in this research to indicate that china s direct investment increases crude oil imports from those countries this article is part of a virtual special issue entitled comparing sustainable energy policies in northeast asia toward the harmonized public private partnership

modelling oil price volatility in this paper we examine the volatility of crude oil price using daily data for the period 1991 2006 our main innovation is that we examine volatility in various sub samples in order to judge the robustness of our results our main findings can be summarised as follows 1 across the various sub samples there is inconsistent evidence of asymmetry and persistence of shocks and 2 over the full sample period evidence suggests that shocks have permanent effects and asymmetric effects on volatility these findings imply that the behaviour of oil prices tends to change over short periods of time

monetary policy rules based on real time data this paper examines the magnitude of informational problems associated with the implementation and interpretation of simple monetary policy rules using taylor s rule as an example i demonstrate that real time policy recommendations differ considerably from those obtained with ex post revised data further estimated policy reaction functions based on ex post revised data provide misleading descriptions of historical policy and obscure the behavior suggested by information available to the federal reserve in real time these results indicate that reliance on the information actually available to policy makers in real time is essential for the analysis of monetary policy rules

does opec still exist as a cartel an empirical investigation the aim of this paper is to determine if opec acts as a cartel by testing whether the production decisions of the different countries are coordinated and if they have an influence on oil prices relying on cointegration and causality tests in both time series and panel settings our findings show that the opec influence has evolved through time following the changes in the oil pricing system while the influence of opec is found to be important just after the counter oil shock our results show that opec is a price taker on the majority of the considered sub periods finally by dividing opec between savers and spenders we show that it acts as a cartel mainly with a subgroup of its members

the inflation aversion of the bundesbank a state space approach abstract a simple backward looking taylor rule is estimated in a time varying coefficient framework with quarterly german data for the period 1975 1998 the main finding is that the inflation aversion of the bundesbank was not constant over time and exhibits some sudden and large shifts during the period of monetary targeting there are phases with low and with high inflation aversion these findings provide an explanation why the estimated inflation coefficient in backward looking taylor rules often does not exceed one and violates the implications of theoretical models moreover the results provide evidence that the bundesbank followed the so called opportunistic approach to disinflation

determinants of china s energy imports an empirical analysis sustained economic growth in china has triggered a surge of energy imports especially oil imports this paper investigates the determinants of china s energy import demand by using cointegraiton and vecm techniques the findings suggest that in the long run growth of industrial production and expansion of transport sectors affect china s oil imports while domestic energy output has a substitution effect thus as the chinese economy industrializes and the automotive sector expands china s oil imports are likely to increase though china s domestic oil production has a substitution effect on imports its growth is limited due to scarce domestic reserve and high exploration costs it is anticipated that china will be more dependent on overseas oil supply regardless of the world oil price

opec s market power an empirical dominant firm model for the oil market abstract we estimate a dominant firm competitive fringe model for the crude oil market using quarterly data on oil prices for the 1986 2016 period the estimated structural parameters have the expected signs and are significant we find that opec exercised market power during the sample period counterfactual experiments indicate that world gdp is the main driver of long run oil prices however supply depletion factors have become more important in recent years

the integration of china into the world crude oil market since 1998 abstract the integration of china into the world oil market is an important issue for at least two reasons first the influence of the country on the world oil market is dependent on the level of the integration second integration into the world oil market means that china is opening itself up to potential disturbances in the world market and this leads to significant energy security concerns for the country the aim of this paper is to investigate whether or not china is an integral part of the world oil market by reviewing the relevant trade and pricing policies of the chinese government as well as the behavior of the chinese national oil companies we find that china is actively engaging itself in the world oil market our time series results show that the chinese oil price is cointegrated with the major oil prices in the world and a high degree of co movement between the prices is found causality between the price pairs is found to be bi directional in most cases the empirical results suggest that china is now an integral part of the world oil market

overview of the northeast asia energy situation abstract rapid economic growth in northeast asia has vastly increased regional needs for energy services in several countries of the region this ongoing growth has been accompanied by significant environmental problems the countries of the region already constitute the largest import market for liquefied natural gas lng the region has accounted for a progressively larger share of world primary energy use its share has risen from under 19 in 1999 to over 25 in 2007 though the region as a whole possesses resources that could contribute substantially toward its future energy needs many major energy resources are far from population centers as such major infrastructure investments will be required to bring these resources to market this article provides a description of the current situation of energy demand and supply in northeast asia summarizes recent trends in energy supply and demand and of the drivers that underlie energy use in the region also presented are projections of energy use and of key impacts of energy use such as greenhouse gas emissions in the region other impacts of continued growth in energy supply and demand in northeast asia are reviewed qualitatively

perceived inflation under loss aversion building on prospect theory we apply the concept of loss aversion to the formation of inflation perceptions and test empirically for nonlinearities in the inflation perceptions relation for a panel of 10 euro area countries specifically under the assumption of loss aversion inflation changes above a certain reference rate will be perceived more strongly rejecting rationality of inflation perceptions in general under symmetric loss and in a majority of cases under flexible loss functions panel smooth transition models give evidence of nonlinearities in the inflation perceptions relation regarding both actual inflation and time this result is confirmed by dynamic fixed effects estimates where the slope of the estimated value function is significantly steeper in the loss region and the implied average reference inflation rate is found close to 2

how do opec news and structural breaks impact returns and volatility in crude oil markets further evidence from a long memory process abstract since its formation opec through its conference decisions has been a major player in the world oil markets the purpose of this paper is to examine the impacts of opec s different news announcements on the conditional expectations and volatility of crude oil markets in the presence of long memory and structural changes to do so we first discern opec s oil production behavior in response to its cut maintain and increase decisions then by applying the arma garch class models to the two global benchmarks wti and brent over the period may 1987 through december 2012 we find strong evidence of long memory the empirical evidence also shows that opec s announcements especially the cut and the maintain decisions have a significant effect on both returns and volatility of the crude oil markets particularly that of the wti moreover we explore the possibility of structural breaks in the crude oil prices and detect five six breakpoints for the wti brent oil markets the presence of structural breaks reduces the persistence of volatility accounting for opec s scheduled news announcements in the presence of structural changes reduces the degree of volatility persistence and enhances the understanding of this volatility in the oil markets these results have several implications for policy makers oil traders and other participants in the crude oil markets

opec announcements and their effects on crude oil prices we investigate evidence on the effects of opec announcements on world oil prices by examining announcements from both official conferences and ministerial meetings on major international crudes including the key benchmarks and several other heavy and light grades with data from 1982 to 2008 we use event study methodology and find differentiation in the magnitude and significance of market responses to opec quota decisions under different price bands we also find some weak evidence of differentiation between light and heavy crude grades

sacrifice ratio in a medium scale new keynesian model a medium scale macroeconomic model with a number of nominal and real frictions that have be shown to be important for explaining observed aggregate uctuations is capable to quantitatively account for the empirically estimated sacri ce ratio after a disin ationary monetary policy this nding however is sensitive to the degrees of price and wage indexation to past in ation and to a less extent to the price and wage calvo probabilities jel classi cation e31 e5

testing the rationality of state revenue forecasts recent revenue shortfalls in several states focus attention on the question of whether states do a good job of forecasting revenues in modem economics forecasts are eval uated on the basis of whether or not they are rational do the forecasts optimally incorporate all available information this paper develops a method for testing the rationality of state revenue forecasts and applies it to the analysis of data from new jersey massachusetts and maryland one of our main findings is that in all three states the forecasts of own revenues are systematically biased downward tn 1985 the 50 states raised 349 billion in revenues from their own sources and received 84 billion in grants from the federal government u s bureau of the census 1987 p 266 state governments are clearly important players in the u s system of public finance and the efficiency with which they conduct their financial affairs has an important impact on consumer welfare one important determinant of a state s ability to con duct reasonable fiscal policies is the quality of its revenue forecasts sensible deliberations about ex penditures cannot be made in the absence of good forecasts indeed in the presence of con stitutional or statutory provisions for balanced budgets unanticipated changes in revenues can wreak havoc not only on proposals that are sched uled for funding but on plans that have already been put into effect as well in recent months two powerful governors michael dukakis of massachusetts and mario cuomo of new york have suffered major politi cal embarrassments because actual revenues fell substantially short of the predictions in their re spective states such episodes focus attention on the question of whether states do a good job of forecasting revenues in modem economics fore casts are evaluated on the basis of whether or not they are rational do the forecasts optimally incorporate all information that is available at the time they are made although there is a large literature on state revenue forecasting methods that literature focuses mostly on state budgetary institutions forecasts themselves are evaluated only in an informal fashion 1 although the theory and econometric methods of rational expectations have been used to evaluate forecasts made by households and businesses 2 these powerful tools have not been applied to state government fore casts this paper applies these methods to the problem of state revenue forecasting and as an example uses them to analyze data from new jersey massachusetts and maryland the results cast light not only on the question of rationality per se but on issues such as the impact of political factors on forecasts section ii presents the conceptual framework for testing rational expectations the relevant in stitutional issues and data are described in section iii the results are discussed in section iv we find that in all three states forecasts of own rev enues are systematically biased downward section v concludes with a summary

conducting monetary policy at very low short term interest rates can monetary policy committees accustomed to describing their plans and actions in terms of the level of a short term nominal interest rate find effective means of conducting and communicating their policies when that rate is zero or close to zero the very low levels of interest rates in japan switzerland and the united states in recent years have stimulated much interesting research on this question and have led some central banks to make changes in their operating procedures and communications strategies in this paper we will give a brief overview of current thinking on the conduct of monetary policy when short term interest rates are very low or even zero monetary policy works for the most part by influencing the prices and yields of financial assets which in turn affect economic decisions and thus the evolution of the economy when the short term policy rate is at or near zero the conventional means of effecting monetary ease lowering the target for the policy rate is no longer feasible however it would be a mistake to think that monetary policy was impotent we discuss three strategies for stimulating the economy at an unchanged level of the policy rate these involve i providing assurance to investors that short rates will be kept lower in the future than they currently expect ii changing the relative supplies of securities in the marketplace by altering the composition of the central bank s balance sheet and iii increasing the size of the central bank s balance sheet beyond the level needed to set the short term policy rate at zero quantitative easing we also discuss the costs and benefits of very low interest rates an issue that bears on the question of whether the central bank should take the policy rate all the way to zero before undertaking alternative policies

estimation and testing of forecast rationality under flexible loss in situations where a sequence of forecasts is observed a common strategy is to examine rationality conditional on a given loss function we examine this from a different perspective supposing that we have a family of loss functions indexed by unknown shape parameters then given the forecasts can we back out the loss function parameters consistent with the forecasts being rational even when we do not observe the underlying forecasting model we establish identification of the parameters of a general class of loss functions that nest popular loss functions as special cases and provide estimation methods and asymptotic distributional results for these parameters this allows us to construct new tests of forecast rationality that allow for asymmetric loss the methods are applied in an empirical analysis of imf and oecd forecasts of budget deficits for the g7 countries we find that allowing for asymmetric loss can significantly change the outcome of empirical tests of forecast rationality

opec behavior a test of alternative hypotheses since interpretations of past and future oil price patterns depends on the model chosen the author tests and compares alternative theories of opec as a first step in validating the choice on any one model the results show that among opec countries the partial market sharing cartel model is the only model not rejected by at least some of the 11 members and gives the best explanation of production in comparison with 11 non opec countries the competitive model could not be rejected for 10 of the 11 non opec producers this raises the question of why if opec is a cartel friedman s predictions have not come true and introduces new questions for future research 19 references 3 tables

fiscal forecasts at the fomc evidence from the greenbooks abstract this paper examines fiscal policy forecasts prepared for the federal open market committee and its influence on u s monetary policy the forecasts contain useful information beyond that i

opec saudi arabia and the shale revolution insights from equilibrium modelling and oil politics why did opec not cut oil production in the wake of 2014 s price fall this study aims at aiding the mostly qualitative discussion with quantitative evidence from computing quarterly partial market equilibria q4 2011 q4 2015 under present short term profit maximisation and different competition setups although the model performs reasonably well in explaining pre 2014 prices all setups fail to capture low prices which fall even beyond perfect competition outcomes this result is robust with respect to large variations in cost parameters rejecting present short term profit maximisation as well as a qualitative discussion of saudi arabian politics and the shale oil revolution lead to the conclusion that the price drop of 2014 16 was most plausibly the result of an attempt to defend market shares and to test for shale oil resilience besides being fuelled by other factors such as rising competitiveness of alternative technologies although shale oil might have increased competition permanently as supported by model results the agreement of december 2016 should not be misunderstood as an opec defeat

short term forecasting of electricity prices for miso hubs evidence from arima egarch models this study estimates three time series models arima arima egarch and arima egarch m for hourly real time electricity prices for each of the five hubs of the midwest independent system operator miso and examines the in and out of sample forecasting performance of the respective models the results from the arima models reveal the presence of autoregressive conditional heteroskedasticity recognizing the possibility of asymmetric time varying volatility the egarch specification for the variance equation demonstrates the presence of an inverse leverage effect in electricity prices for each hub with respect to forecasts no one model clearly dominates the others in terms of in sample forecasting performance based on four forecast evaluation statistics however the arima egarch m model outperforms the other models michigan hub is the exception in terms of the out of sample forecasting performance

the interest rate learning and inventory investment this paper presents a model that provides an explanation based on regime switching in the real interest rate and learning of why tests based on stock adjustment models euler equations or decision rules which emphasize short run fluctuations in inventories and the interest rate are unlikely to uncover a negative relationship between inventories and the real interest rate the model however predicts that inventories will respond to long run movements that is to regime shifts in the real interest rate tests emphasizing cointegration techniques confirm this prediction and show a significant long run relationship between inventories and the real interest rate

the influence of south korean energy policy on opec oil exports abstract south korea is the fifth top oil importer worldwide with 64 of its oil coming from opec member countries over the last 30 years south korea accounted for a rapid increase in energy use this in turn led south korea to be totally dependent on oil imports due to this increase south korea has been experiencing drastic changes in its energy system which could potentially impact its dependence on opec oil import external and internal factors have forced south korea to change its energy strategy and targets these targets would be achieved by reducing its energy intensity and utilizing electricity and renewable energies in order to reduce its dependence on oil consumption low carbon green growth is one policy along with many other energy policies developed by south korea for reducing greenhouse gases thus this policy is receiving a remarkable attention today these national policies along with other international ones are needed to mitigate greenhouse gas emissions and promote other green initiatives this study puts emphasis on these policies as well as uses them to predict the future energy profile of south korea and how these policies will impact on oil imports from opec member countries

financial market segmentation stock market volatility and the role of monetary policy we explore the role of monetary policy in a world of segmented nancial markets where the agents who trade stocks encounter nancial income risk although the rest do not in such an economy we ask the question of how the monetary authority operates when it aims to maximize total welfare we nd that optimal monetary policy has the novel role of sharing the nancial market risk traders face among all agents in the economy this nding holds for any concave utility function and is not sensitive to the degree of market segmentation when risk is shared perfectly in this way consumption is equalized between the two groups and agents if given the choice would be indierent between participating or not in the nancial markets we also explore the implications that this policy has for the volatility of stock prices and of ination when compared to the policies of constant money supply ination targeting and nominal interest rate pegging we nd that optimal monetary policy is not necessarily associated either with minimal stock price volatility or with minimal ination volatility

trade liberalization and tax reform strategies the case of the korean oil industry abstract the decline in government revenues due to tariff reductions has become a major concern for most developing countries including korea this paper focuses on the korean oil industry to examine which post trade liberalization tax reform strategy is optimal depending on the government s priority between social welfare and government revenue we find that the important factors for choosing an optimal tax reform policy are price elasticity of demand and market competition based on a price inelastic demand and the low competitive market for korea s oil industry if the goal of a tax reform policy is to increase social welfare the recommended strategy is to raise the consumption tax by a scale of less than the sum of tariff cuts times the crude oil price and oil import tax cuts this strategy would also reduce inflation but it could be detrimental to government revenue however if the policy s goal is the preservation of government revenue the recommended strategy is to raise the consumption tax by a scale equal to the sum of tariff cuts times the crude oil price at the pre tax reform and oil import tax cuts this strategy does not change either government revenue or social welfare

prices technology development and the rebound effect abstract energy efficiency is the critical parameter for policies that aim at reducing energy consumption while maintaining or even boosting economic growth the two main options to influence energy efficiency are changes in relative prices i e raising the price of energy through economic instruments or to introduce new technologies which increase the productivity of each unit of energy this paper is based on the notion that in an equilibrium economy the marginal economic productivity is identical for all factors i e energy labour knowledge and capital from this premise two main conclusions can be drawn first any change in price or technology will have an impact on the whole economy by creating feedbacks through the substitution of factors of production and goods as well as increased wealth second the two policy approaches changing relative prices and technology development are not opposite to each other they are the two faces of the same reality and should be developed and promoted simultaneously and consistently

a dynamic network analysis of the world oil market analysis of opec and non opec members abstract we characterize the dynamic network structure of major oil producing countries we examine the oil production coordination of 13 organization of the petroleum exporting countries opec and 17 non opec members we construct the dynamic network structure using the network connectedness measure of diebold and yilmaz 2009 we investigate the structural changes in connectedness of opec and non opec members additionally we study how the influence of opec members non opec countries and major oil producers evolve we find that the network structure of major oil producing countries changes significantly over time specifically the impact of changes in oil production of all opec members on global oil production declines whereas the impact of non opec on global oil production increases opec s increase decisions have a significant and positive impact on opec and non opec coordination however cut decisions do not affect coordination we find that opec countries and developing countries have significantly higher levels of connectedness additionally countries with high oil production levels have significantly more influence the empirical results provide intuition about the recent developments in global oil production

forecasting crude oil market volatility further evidence using garch class models abstract this paper extends the work of kang et al 2009 we use a greater number of linear and nonlinear generalized autoregressive conditional heteroskedasticity garch class models to capture the volatility features of two crude oil markets brent and west texas intermediate wti the one five and twenty day out of sample volatility forecasts of the garch class models are evaluated using the superior predictive ability test and with more loss functions unlike kang et al 2009 we find that no model can outperform all of the other models for either the brent or the wti market across different loss functions however in general the nonlinear garch class models which are capable of capturing long memory and or asymmetric volatility exhibit greater forecasting accuracy than the linear ones especially in volatility forecasting over longer time horizons such as five or twenty days

the economic value of lng in the korean manufacturing industry abstract although lng is an important input to industrial production for manufacturing firms its economic value has been rarely investigated in the literature this paper attempts to estimate the economic value of lng in korea s manufacturing sector by employing the concept of the value of marginal product vmp for this we used data on 328 firms using lng as an input two types of production functions the cobb douglas and trans log functions are applied the result of the specification test indicates that the trans log function is more appropriate for estimating the data the output elasticity and vmp of industrial lng are estimated to be 0 1346 and krw 6844 usd 6 22 per m 3 respectively the results have important implications for various areas of industrial lng management for example any cost benefit analysis of new projects providing industrial lng requires information on the economic value of industrial lng in addition such information is useful for the korean government s future policies on lng pricing

introduction to the asian energy security project project organization and methodologies the spectacular recent economic growth in the asia pacific region in general and in many of the economies of northeast asia in particular has spurred a vast expansion in the need for energy services and an expansion in the demand for the fuels that help to supply these services future projections suggest that the growth of fossil fuel use in northeast asia especially in china will have major consequences for financial and fuel markets and pollution both regionally and globally before the project described in this paper was initiated there was no ongoing forum for energy experts from all of the countries of the region to meet informally and in an unofficial capacity to discuss openly and in a targeted fashion the energy situations in their countries and to work together to evaluate the energy efficiency costs and benefits of different ways of meeting regional demand the asian energy security aes project provides such a forum and as such constitutes a unique resource in the engagement of the countries of northeast asia on the topic of energy security

the overseas acquisitions and equity oil shares of chinese national oil companies a threat to the west but a boost to china s energy security abstract this paper argues that both china and the western countries need to de politicize china s global quest for energy security the western politicians need to recognize that their rhetoric in relation to china s efforts to secure energy supplies overseas has done nothing but intensify china s fear that they might seek to deny china s access to the oil it needs for the development china needs to reconsider its stance of distrusting global oil markets and to recognize that the reliance on aggressive acquisitions of overseas oil fields and equity oil production has been of little help in strengthening its energy security given that china s energy security depends increasingly and deeply on the stability of global oil markets and reliable and growing oil supplies to the market china shares with other major oil importing countries profound common interests in maintaining and strengthening the stability of global oil markets and reducing the chance of potential disruptions to oil supply and the resulting damaging oil price shocks

exploring crude oil production and export capacity of the opec middle east countries abstract as the world economy highly depends on crude oil it is important to understand the dynamics of crude oil production and export capacity of major oil exporting countries since crude oil resources are predominately located in the opec middle east these countries are expected to have significant leverage in the world crude oil markets by taking into account a range of uncertainties in this study we develop a scenario for crude oil export and production using the aceges model considering uncertainties in the resource limits demand growth production growth and peak decline point the results indicate that the country specific peak of both crude oil export and production comes in the early this century in the opec middle east countries on the other hand they occupy most of the world export and production before and after the peak points consequently these countries are expected to be the key group in the world crude oil markets we also find that the gap between the world crude oil demand and production broadens over time meaning that the acceleration of the development of ultra deep water oil oil sands and extra heavy oil will be required if the world continuous to heavily rely on oil products

do opec announcements influence oil prices abstract this paper investigates the effect of opec production decisions increase cut maintain on both wti and brent crude oil prices between q1 1991 and q1 2015 by employing the event study methodology and by using two indices as benchmarks bci and s p gsci we employ an egarch model to take into account the high volatility of oil prices and some stylized facts characterizing this volatility we find that the impact of opec s announcements on oil prices i evolves over time and among decisions ii is more significant for production cut and maintain iii is different for wti and brent prices and iv is sensitive to the benchmark index moreover opec s decisions depend on the exploration and extraction cost of more expensive unconventional oil resources

has u s monetary policy changed evidence from drifting coefficients and real time data despite the large amount of empirical research on monetary policy rules there is surprisingly little consensus on the nature or even the existence of changes in the conduct of u s monetary policy three issues appear central to this disagreement 1 the specific type of changes in the policy coefficients 2 the treatment of heteroskedasticity and 3 the real time nature of the data used this paper addresses these issues in the context of forwardlooking taylor rules with drifting coefficients the estimation is based on real time data and accounts for the presence of heteroskedasticity in the policy shock the findings suggest important but gradual changes in the rule coefficients not adequately captured by the usual split sample estimation in contrast to orphanides 2002 2003 i find that the fed s response to the real time forecast of inflation was weak in the second half of the 1970s perhaps not satisfying taylor s principle as suggested by clarida gali and gertler 2000 however the response to inflation was strong before 1973 and gradually regained strength from the early 1980s onward moreover as in orphanides 2003 the fed s response to real activity fell substantially and lastingly during the 1970s

interpretation and limits of sustainability tests in public finance public debt is considered sustainable if discounted net repayments are expected to cover the initial debt issuance i e if the government s inter temporal budget constraint is expected to hold with risk averse lenders and an uncertain economic environment bohn 1995 stresses that this constraint relies on a stochastic discount factor which depends on lenders preferences to get round the difficulty related to the specification of private agents preferences in empirical analysis bohn 1998 suggests to estimate fiscal reaction functions describing how primary surplus reacts to indebtedness after having solved the econometric issues arising when primary surplus and debt have a very different persistence with a nonparametric approach or are both integrated with parametric tests we estimate fiscal reaction functions for france and greece there remain important limitations and interpretation difficulties that are common to all econometric sustainability tests

does the federal reserve have private information about its future actions this paper contributes to the ongoing debate about the existence and source of asymmetric information between the federal reserve and the public by examining the federal funds rate forecasts it compares the federal reserve federal funds rate forecasts with the predictions of alternative forecasting models and forecasts from the futures market for federal funds the results show that the federal reserve has superior information about its own future policy actions the future federal funds rate the results are robust to alternative specifications

energy demand and supply energy policies and energy security in the republic of korea abstract the republic of korea rok has enjoyed rapid economic growth and development over the last 30 years rapid increases in energy use especially petroleum natural gas and electricity and especially in the industrial and transport sectors have fueled the rok s economic growth but with limited fossil fuel resources of its own the result has been that the rok is almost entirely dependent on energy imports the article that follows summarizes the recent trends in the rok energy sector including trends in energy demand and supply and trends in economic demographic and other activities that underlie trends in energy use the rok has been experiencing drastic changes in its energy system mainly induced by industrial supply security and environmental concerns and energy policies in the rok have evolved over the years to address such challenges through measures such as privatization of energy sector activities emphases on enhancing energy security through development of energy efficiency nuclear power and renewable energy and a related focus on reducing greenhouse gas emissions the assembly of a model for evaluating energy futures in the rok rok2010 leap is described and results of several policy based scenarios focused on different levels of nuclear energy utilization are described and their impacts on of energy supply and demand in the rok through the year 2030 are explored along with their implications for national energy security and long term policy plans nuclear power continues to hold a crucial position in the rok s energy policy but aggressive expansion of nuclear power alone even if possible given post fukushima global concerns will not be sufficient to attain the rok s green economy and greenhouse gas emissions reduction goals

evaluating the efficiency of the fomc s new economic projections since 2007 fomc policymakers have been publishing detailed numerical projections of macroeconomic series over the next three years by testing whether the revisions to these projections are unpredictable i find that fomc s efficiency is generally accepted for inflation but often rejected for real economic variables notably for the unemployment rate the rejection is due to the strong autocorrelation of revisions which may reflect information rigidity of fomc s unemployment projections the joint efficiency of the entire projection is accepted in most cases

a supply model for crude oil and natural gas in the middle east abstract crude oil co and natural gas ng play an important role in the world economy the arab countries acs share 64 of the total oil reserves and 40 of the ng reserves opec 2003 the annual statistical bulletin on the production side acs contribute to 30 and 9 of the world production of co and ng respectively accurate forecast models are needed to do better planning and create less risky business environment in this paper an econometric model is built to capture the behavior of co and ng production in the escwa 1 countries the model is used to forecast future production trends of co and ng and thus provide a powerful tool for researchers planners and investors working in the energy field

event studies in economics and finance the event study is an important research tool in economics and finance the goal of an event study is to measure the effects of an economic event on the value of firms event study methods exploit the fact that given rationality in the marketplace the effects of an event will be reflected immediately in security prices thus the impact can be measured by examining security prices surrounding the event in this paper event study methods are described including some of the potential complications an example is included to illustrate the approach

estimating the federal reserve s implicit inflation target a state space approach abstract existing estimates of the federal reserve s implicit inflation target typically rely on the assumption that it is constant for the duration of the period of analysis this paper relaxes this assumption and estimates the implicit inflation target using a time varying parameter model and the kalman filter in applying this method to the volcker greenspan period it finds significant time variation in the implicit target that is consistent with hypotheses about opportunistic disinflation and the recent deflation scare

china s energy security and its challenges towards 2035 abstract within the last twenty years china has become dependent on import of coal oil and natural gas especially oil is now an economic and a security concern by the chinese regime and key international stakeholders until 2035 china will account for one fourth of the global net growth in global gas consumption and more than half of the net growth in oil consumption the future demand cannot be covered by china s own conventional and unconventional sources pipelines from neighboring countries can cover more than half of the needed import of natural gas by 2030 but only 10 percent of the import demand of oil is secured so far even if china attempts to address its insufficient supply of oil by increased investments in overseas oil fields there is still a large gap furthermore the oil import will largely come from politically unstable countries and regions and the bulk of the supplies must be shipped through the potentially insecure hormuz and malacca straits the ongoing territorial disputes with neighboring countries regarding areas with gas and oil reserves in contested waters bear evidence to regional conflict potentials and china appears to engage more actively in energy diplomacy and regional cooperation