disentangling demand and supply shocks in the crude oil market how to check sign restrictions in structural vars given the growing dissatisfaction with exclusion and long run restrictions in structural vector autoregressive analysis sign restrictions are becoming increasingly popular so far there are no techniques for validating the shocks identied via such restrictions although in an ideal setting the sign restrictions specify shocks of interest sign restrictions may be invali dated by measurement errors data adjustments or omitted variables we model changes in the volatility of the shocks via a markov switching ms mechanism and use this devise to give the data a chance to object to sign restrictions the approach is illustrated by considering a small model for the market of crude oil

a quality adjusted price index for personal computers this study estimates quality adjusted price indexes for personal computers three separate hedonic models are estimated using data from 1 841 personal computers over the period 1984 1991 in addition to the traditional linear model a nonlinear model is developed and estimated the nonlinear model is parsimonious in parameters allows time varying attribute prices and can be estimated using a pooled data set the results indicate that nominal quality adjusted prices of mail order firms declined at an average annual rate of 24 62 quality adjusted prices of major manufacturers declined at a slower rate

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

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

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

testing for common features in north american energy markets abstract using recent advances in the field of applied econometrics we explore the strength of shared trends and shared cycles between north american natural gas and crude oil markets in doing so we use daily data from january 1991 to april 2001 on spot u s henry hub natural gas and wti crude oil prices the results show that there has been decoupling of the prices of these two sources of energy as a result of oil and gas deregulation in the united states we also investigate the interconnectedness of north american natural gas markets and find that north american natural gas prices are largely defined by the u s henry hub price trends

pricing and financial resources an analysis of the disk drive industry 1980 88 this paper empirically examines the long purse hypothesis formalized by patrick bolton and david scharfstein 1990 that incumbents may drive out entrants through aggressive pricing the author analyzes the pricing of 733 disk drives between 1980 and 1988 drives that are adjacent to those manufactured by thinly capitalized undiversified rivals are priced lower than other drives during the later years in the sample when little equity financing was available to these firms the results are robust to controls for alternative hypotheses and to other specifications of the hedonic regression copyright 1995 by mit press

hedonic price indexes for spreadsheets and an empirical test for network externalities in this article i first estimate hedonic price equations for computer spreadsheet programs and then use the analysis to empirically test whether network externalities exist in this industry the study shows that consumers are willing to pay a significant premium for spreadsheets that are compatible with the lotus platform and for spreadsheets that offer links to external databases and a similar premium for spreadsheets that offer local area network externalities finally the quality adjusted real price of computer spreadsheets declined by approximately 15 per year from 1986 to 1991

uncertainty and monetary policy in a wage bargaining model in a wage bargaining model increased uncertainty concerning monetary and real aggregates is shown to give rise to a higher equilibrium unemployment rate moreover the equilibrium unemployment rate is found to depend on the choice of monetary policy regime as this choice affects the uncertainty wage setters face when setting the nominal wage rate it is also shown that the equilibrium inflation rate may depend on uncertainty in such a way that increased uncertainty gives rise to a higher equilibrium unemployment rate as well as a higher equilibrium inflation rate or what has been called stagflation

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

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

endogenous unions and governments a game theoretic approach abstract this paper applies some elements of game theory to the determination of government spending and wages within a simple macroeconomic framework where these variables are ordinarily treated as exogenous in the short run by showing how nominal wages respond to increased government spending and taxes and vice versa the paper attempts to explain the simultaneous tendency of many western economies toward persistent inflation and expansion of the public sector in particular the paper stresses the macroeconomic consequences of the interaction between endogenous utility maximizing governments and labour unions and shows how the response of the economy to changes in government and union behaviour depends on the preferences of both parties with respect to inflation employment real disposable wages and government spending as well as on their view of the relative magnitude of the employment and price effects of such changes

what drives volatility in natural gas prices abstract we examine the primary drivers of u s natural gas price volatility to do so we apply a structural heterogeneous autoregressive var shvar model accommodating structural breaks in both the coefficient and volatility to monthly time series data on natural gas supply demand and price between january 1978 and july 2018 we detect several structural changes in coefficients and shock volatility in the natural gas market our findings indicate that the response of natural gas prices differs significantly depending on the regime and type of shock in the natural gas market while demand shocks specific to the natural gas market are the primary drivers of natural gas price volatility structural supply shocks also play a significant role in explaining movements in natural gas prices our results suggest that failure to consider structural breaks in the coefficient and volatility may result in biased estimates and distorted impulse responses of the impact of shocks on natural gas price volatility

convergence of european natural gas prices abstract over the period 2015 2050 the consumption of natural gas of european oecd countries is expected to grow more than the consumption of any other energy source although these countries are interconnected and in most cases share a common currency their wholesale national gas markets are highly heterogeneous we study the determinants of cross country convergence of natural gas prices for industrial consumers in fourteen european countries our empirical analysis is based on the notions of pairwise relative and convergence we show that there is evidence of pairwise price convergence and that some key characteristics of gas markets such as the existence of trading hubs and the degree of interconnection are positively associated with the existence of a convergence process this result carries over to the notion of convergence and is robust to a number of changes in the implementation of the statistical tests the analysis of relative convergence points to the existence of price growth convergence while price level convergence is not supported by the data lastly we assess the short run implications of price convergence focusing on the speed of reversion to equilibrium after a system wide shock hits the cointegrating relation

classical unemployment accommodation policies and the adjustment of real wages a model of wage formation and stabilization policy in economies with strong trade unions is developed the analysis provides a theoretical underpinning for the assertion that accommodation policies may cause wage inflation and ultimately reduce employment various methods of accomplishing a real wage adjustment are discussed i a policy of complete nonaccommodation 2 continued accommodation policies but with lower employment targets 3 social contracts and 4 tax based incomes policies tip

an integration of trade union models in a sequential bargaining framework this paper aims to embed two popular models of trade union behavior the monopoly model and the efficient bargaining model in a more general framework it does this by analyzing sequential bargaining models where wages are determined before employment and the power of the union in the two stages of the bargain differs as well as finding that the monopoly and efficient bargain models are special cases of this model a new class of models is also discovered this framework is used to analyze the relationship between union pow er and efficiency the empirical analysis of trade unions and the effects of trade union legislation copyright 1987 by royal economic society

union militancy external shocks and the accommodation dilemma stabilization policy under centralized wage setting is represented as a noncooperative game between an encompassing union and the government the dilemma of the government is whether or not to accommodate supply disturbances when it cannot tell if they are due to an intentionally militant wage policy or unforeseen external price shocks in a single round of wage setting there is no government strategy which can both guarantee full employment and prevent union militancy in a repeated game however there exists a conditional accommodation policy which permits accommodation of supply shocks while inducing the union to refrain entirely from a militant wage policy

majority voting with single crossing preferences we clarify and extend a number of sufficient conditions for the existence of a majority voting equilibrium on one dimensional choice domains these conditions variously stated in the previous literature all impose order restrictions on voter preferences for instance monotone marginal rates of substitution which we show to imply or be equivalent to a general ordinal version of the single crossing condition this simple property is economically intuitive and easily checked in applications this ease of application is demonstrated through an examination of voting models of redistributive income taxation and trade union bargaining behaviour

what do we learn from the price of crude oil futures summary despite their widespread use as predictors of the spot price of oil oil futures prices tend to be less accurate in the mean squared prediction error sense than no change forecasts this result is driven by the variability of the futures price about the spot price as captured by the oil futures spread this variability can be explained by the marginal convenience yield of oil inventories using a two country multi period general equilibrium model of the spot and futures markets for crude oil we show that increased uncertainty about future oil supply shortfalls under plausible assumptions causes the spread to decline increased uncertainty also causes precautionary demand for oil to increase resulting in an immediate increase in the real spot price thus the negative of the oil futures spread may be viewed as an indicator of fluctuations in the price of crude oil driven by precautionary demand an empirical analysis of this indicator provides evidence of how shifts in the uncertainty about future oil supply shortfalls affect the real spot price of crude oil copyright 2010 john wiley sons ltd

hedonic regressions mis specification and neural networks there is an emerging literature in the field of hedonic regressions which successfully applies flexible functional forms in contrast numerous authors report hedonic regressions with relatively simple functions often with little or no attempt to consider interaction terms and higher level powers such simple functions perform relatively well in spite of good a priori grounds for quite complex interaction effects indeed the studies are characterised by a general indifference to testing these more flexible models even when degrees of freedom permit using detailed scanner data hedonic functions for the uk tv market are estimated and tested for interaction effects for a case study of the market higher level interaction effects are tested for and compare the results with those from a neural network with its property of universal approximation the use of neural networks is particularly novel in this context and some general findings on their suitability emerge

on the choice of funtional form for hedonic price functions this study examines how errors in measuring marginal attribute pric es vary with the form of the hedonic price function in simulations consumers with known utility functions bid for houses with given attributes various forms of the hedonic function are estimated using equilibrium housing prices errors in estimating marginal attribute prices are calculated by comparing each consumer s equilibrium marginal bid vector with the gradient of the hedonic function when all attributes are observed linear and quadratic box cox forms produce lowest mean percentage errors however when some attributes are unobserved or are replaced by proxies linear and linear box cox functions perform best copyright 1988 by mit press

hedonics and demand analysis the implicit demand for player attributes i introduction hedonic analysis is the standard technique of applied econometrics for modeling differentiated products a hedonic price function relates the observed price of a differentiated good to the bundle of characteristics of which the good is composed the derivatives of the function with respect to the characteristics are the implied hedonic prices which empirical work typically seeks to estimate as has been recognized since at least the work of rosen 1974 underlying the hedonic price function is an implicit market for these characteristics a number of studies have attempted to estimate the associated supply demand system in particular applied contexts based on data on the quantities of the characteristics used in the estimation of the hedonic price function and the resulting estimated hedonic prices examples include nelson 1978 witte sumka and erekson 1979 and thomas 1993 rather than a complete supply demand system other authors focus only on the implicit demand for characteristics for example polinsky and rubinfeld 1977 harrison and rubinfeld 1978 agarwal and ratchford 1980 bender gronberg and hwang 1980 blomquist and worley 1981 quigley 1982 mendelsohn 1984 and palmquist 1984 a curious aspect of these studies which appears to have gone unrecognized is the failure to draw on modern econometric demand analysis in the estimation of the implied demand system for the characteristics instead the analysis of the implicit market proceeds on the basis of ad hoc typically linear or loglinear functional forms which involve no explicit derivation from consumer theory and which impose arbitrary and non testable restrictions on preferences as a consequence there is little means beyond descriptive econometric measures goodness of fit examination of signs and t ratios and so on for judging the adequacy or legitimacy of the results no use is made of contemporary flexible functional form methodology which provides a second order approximation to arbitrary preferences and which permits in addition to the calculation of elasticities the testing of fundamental hypotheses of consumer theory such as demand homogeneity and symmetry of the slutsky matrix and numerical checks on the concavity of the associated implied expenditure function the present work attempts to fill this gap however instead of a differentiated good in a product market to which consumer demand theory would apply we choose to study a good in a factor market so that the relevant demand equations are a system of factor demands for the underlying characteristics the good in question is the service of baseball players to major league baseball teams which is a differentiated good in that different players represent different bundles of alternative attributes such as pitching or hitting skills our focus is solely on the implicit demand system for these attributes no attempt is made to estimate the associated supply system reflecting player behavior there are several reasons for this seemingly peculiar choice of commodity first the factor market for baseball players is of some intrinsic interest as evidenced by the extent to which it has been studied by economists for a taste of this see the entry by quirk 1987 in the new palgrave and the recent survey by fort and quirk 1995 in particular the market has been the focus of work by labor economists examples are blass 1992 khan 1993a 1993b and sommers 1992 much of this literature derives from the seminal work of scully 1974 who estimated equations for baseball player salaries as functions of player skills although not previously recognized in these terms underlying scully s salary equations are implicit markets for player skills the previous work involving baseball salary equations by scully 1974 1989 and others for example blass 1992 hill and spellman 1984 fort 1992 pascal and rapping 1972 raimondo 1983 and sommers 1990 is useful because it provides guidance as to the appropriate specification of the hedonic price equation

how robust is the microeconomic theory of the trade union this article argues that the predictions of standard trade union models and the tests for distinguishing between these models are not robust to quite small and reasonable changes in the conventional assumptions in particular it considers the effect of assuming that the ex post substitutability between labor and capital is less than the ex ante substitutability the paper shows that much of the conventional wisdom about the effects of trade unions is not necessarily true in this framework

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

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

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

labor union objectives and collective bargaining we consider a model oflabor union behavior in which workers make decisions about wages and employment by simple majority rule we show that under general conditions such a union has a well behaved objective function different from those previously postulated in the literature we then show that the union s majority preferences generally lack a von neumann morgenstern utility representation and thus cannot be inserted into traditional bargaining models we then develop and characterize the solutions to a new bargaining model that is consistent with the structure of union preferences several comparative statics results are presented

an analysis of the global oil market using svarma models the paper analyses the importance of supply versus demand shocks on the global oil market from 1974 to 2017 using a parsimonious structural vector autoregressive moving average svarma model the superior out of sample forecasting performance of the reduced form varma compared to var alternatives advocates the suitability of this framework we specifically account for the changes in the oil market over three distinctive sub periods pre moderation great moderation and post moderation periods to provide a means of identifying the changing nature of shock transmission mechanism across times the findings shed some light on the effects of supply versus demand related oil shocks under different economic environment oil supply shocks explain large fraction of the movements in the global oil market in the pre and post moderation periods i e during the slower economic growth periods the importance of global activity shock on oil price movements is obvious during the 2003 2008 boom period the oil specific shock has an interesting transmission path on the global economic activity where the global activity responded positively and negatively during the global economic expansion and contraction respectively emphasising the precautionary nature of the shock

on the choice of functional form for hedonic price functions the empirical results presented in this paper demonstrate the usefulness of quadriatic models in the estimation of hedonic price functions we propose a quadriatic semi log model a restricted case of the quadriatic box cox model whose standardized marginal attribute prices are linear functions of the attribute vector this specification outperforms the linear box cox specification in terms of explanatory power and captures much of the increase in explanatory power provided by the quadriatic box cox model without the corresponding loss in the ability to interpret the coefficient estimates for policy applications the quadriatic semi log model provides a useful alternative to linear specification

estimating consumer preferences using market data an application to us automobile demand this paper explores the possibility of using market data to identify consumer preferences a utility function composed of homogeneous characteristics and goods specific effects is used as a basic link between the goods space and the characteristics space the functional form for the hedonic price equation the data requirements and issues of measurement errors for estimating demand and supply of characteristics are discussed we illustrate the methodology by considering the us automobile demand using 1969 86 data compiled from consumer reports and ward s automotiveyearbook

how do oil price shocks affect the output volatility of the u s energy mining industry the roles of structural oil price shocks abstract this paper focuses on how explicit structural shocks that characterize the endogenous character of international oil price change affect the output volatility of the u s crude oil and natural gas mining industries to this end we employ a modified structural vector autoregressive model svar to decompose real oil price changes into four components u s supply shocks non u s supply shocks aggregate demand shocks and oil specific demand shocks mainly driven by precautionary demand the results indicate that output volatility of the u s crude oil and natural gas mining industry has significantly negative responses to u s supply shocks aggregate demand shocks and oil specific demand shocks while lacks significant response to non u s supply shocks variance decomposition and historical decomposition confirm that u s supply shocks occupy most explaining variations in output volatility among the four structural oil shocks moreover the oil specific demand shocks explain more variation than that of aggregate demand shocks for the crude oil mining industry but the opposite is true for the natural gas mining industry

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

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

heterogeneous noncompliance with opec s oil production cuts abstract in this study we explore the heterogeneous noncompliance behavior among ten member nations of the organization of the petroleum countries opec overall we find that the three top oil producers saudi arabia iran and venezuela and the four relatively low oil producers libya indonesia algeria and qatar exhibit higher cheating frequencies and magnitudes while they tend to offset their peers conduct conversely the three mid oil producers uae nigeria and kuwait display much lower frequencies and magnitudes of noncompliance with opec s administered quotas while they largely demonstrate herding behavior among their peers the volatilities of the respective cheating magnitudes are rather similar across the three clusters though this study contributes to the economic literature by further illuminating the operational mode of opec and by exposing its three main subsets its interdependent structure and its members customary behavioral patterns

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

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

countervailing power and consumer prices this paper considers the importance of countervailing power manifested as the effects of increased retail concentration on consumer prices and welfare within a market setting where imperfectly competitive retailers negotiate intermediate prices with a monopoly supplier only when retailer services are regarded as very close substitutes do final prices fall following a reduction in the number of retailers even in these circumstances the social benefits of countervailing power may not be realised as the supplier may seek to protect its profits by using a refusal to supply restraint to engage in exclusive trading

competing compatibility standards and network externalities in the pc software market this paper is an empirical study of the value of four file compatibility standards for transferring data in the personal computer software market the results are that only the lotus file compatibility standard is significant in explaining price variations and it is significant in both the spreadsheet and database management system markets this supports the hypothesis that the personal computer software market exhibits complementary network externalities copyright 1995 by mit press

new hedonic estimates of regional constant quality house prices abstract this paper employs a new national data set to estimate constant quality dwelling prices for four regions of the country the data set collected by the national association of realtors provides sale prices locations and characteristics of 5581 dwellings sold during the years 1986 1992 inclusive the paper provides the first national hedonic analysis based upon transaction prices of sample dwellings the estimated equation implies that more than half of dwelling price increases during the period resulted from quality improvements in dwellings

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

trade unions nonneutrality and stagflation the claim that in policy games nonneutrality and a stagflation bias emerge in equilibrium if the unions care about inflation per se is discussed this assumption is shown to be not necessary to obtain a stagflation bias the same applies to nonneutrality if a government acts in the economy the question of whether unions should be envisaged as institutions i e interested in variables unrelated to wages and employment is also addressed two model based alternatives providing microeconomic foundations versus macroeconomic foundations to unions behaviour are presented the conclusion is that the modelling of unions remains an unsettled problem

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

governments trade unions and the macroeconomy an expository analysis of the political business cycle we have briefly reviewed the state of the art of research on the political business cycle in the context of a simple textbook model of the macroeconomy it has been demonstrated that the government generated political business cycle vanishes as expectations turn rational even then however non inflationary policies apparently are time inconsistent hence democracies seem to be stuck with some sort of inflationary bias

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

asymmetric reactions of the us natural gas market and economic activity this paper provides new empirical evidence on the asymmetric reactions of the us natural gas market and us economy to its market fundamental shocks we find that results based on a smooth transition vector autoregressive stvar model provides a plausible and robust explanation to the behavior of the us natural gas market which asymmetrically reacts in bad times and good times during times of recession natural gas production shrinks in response to a positive oil price shock while the corresponding response is found to be positive in times of expansion the positive relationship between the price of natural gas and crude oil is found to be more prominent in expansions especially in the long run in addition the results also reveal that us economic activity is much more sensitive to oil and natural gas price shocks occurring in bad times than in good times

the choice of functional forms for hedonic price equations comment abstract rosen 13 freeman 4 halvorsen and pollakowski 6 and others have stressed that economic theory does not suggest an appropriate functional form for hedonic price functions 1 it consequently is reasonable to try several functional forms and utilize the multiple regression equation with the best performance in this spirit halvorsen and pollakowski 6 recommend using the box cox flexible functional form for hedonic analysis and measuring best performance with a goodness of fit test the box cox methodology has also been adapted in hedonic studies by goodman 5 linneman 10 blomquist and worley 1 and eberts and gronberg 3 2 the box cox is particularly suited for testing functional forms because many familiar forms such as semilog log linear and translog are subsets of the flexible box cox permitting nested hypothesis testing in this note we illustrate that the formal hypothesis testing advantage of the box cox functional form is purchased at the expense of other important goals the goal of most hedonic studies is to estimate the prices of the characteristics to measure the response to changes in the prices and or to predict future expenditures using a best fit criterion to choose functional forms does not necessarily lead to more accurate estimates of characteristic prices in fact the large number of coefficients estimated with the box cox functional form reduces the accuracy of any single coefficient which could lead to poorer estimates of specific prices second because any negative number raised to a noninteger real power is imaginary the traditional box cox functional form is not suited to any data set containing negative numbers third the box cox functional form may be inappropriate for prediction since the mean predicted value of the untransformed dependent variable need not equal the mean of the sample upon which it is estimated the predicted untransformed variable housing value will be biased the predicted untransformed dependent variable may also be imaginary fourth the nonlinear transformation results in complex estimates of slopes and elasticities which are often too cumbersome to use properly we discuss each of these drawbacks and quantify them when possible in the remainder of this note

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

the interaction of monetary policy and wages this paper focuses on the interaction of monetary policy and wage formation in economies with strong labor unions government and unions are viewed as endogenous utility maximizers and the macroeconomic consequences of their strategic interaction are explored with the aid of some elements of simple game theory specifically it is shown a how labor unions adjust wages to prices so as to maximize their utility following changes in monetary policy b how the effectiveness of monetary policy is circumscribed without necessarily being nullified by the utility maximizing reactions of unions and c how the interplay of government and unions can create a persistent tendency towards inflation and unemployment simultaneously

estimation of a hedonic price equation for bordeaux wine does quality matter in this paper the hedonic price technique is applied to bordeaux wine in the hedonic price function we include not only the objective characteristics appearing on the label of the bottle but also the sensory characteristics of the wine our data come from an experimental study in which juries have evaluated and graded a sample of bordeaux wines the estimation of the hedonic price equation shows that the market price is essentially determined by the objective characteristics the estimation of a jury grade equation shows that quality unlike the market price is essentially determined by the sensory characteristics

the effect of wage bargains on the stock market value of the firm the author estimates the change in the value of common stock resulting from an unexpected change in collectively bargained labor costs using bargaining unit wage data and nyse stock returns he estimates a dollar for dollar trade off between these variables this result is consistent with stock valuations based on present value maximizing managerial decisions that is the results are consistent with hotelling s lemma the author also finds support for the hypothesis that collective bargains maximize the sum of shareholder and union member wealth that is the results are consistent with strong efficiency in the contracting environment copyright 1989 by american economic association

unexpected inflation real wages and employment determination in union contracts this paper examines the effect of nominal contracting provisions on employment determination in union contracts in most contracts the nominal wage rate is wholly or partially predetermined real wage rates therefore contain unanticipated components that reflect unexpected price changes and the degree of indexation the empirical analysis based on a large sample of indexed and nonindexed contracts suggests that unexpected real wage changes are associated with systematic employment responses in the opposite direction the author concludes that nominal contracting provisions play a potentially important role in the cyclical properties and persistence of employment movements in the union sector copyright 1990 by american economic association

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

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

hedonic prices and implicit markets estimating demand and supply functions for differentiated products in choosing the level of quality to purchase the buyer of a differentiated product also chooses a point on the marginal price schedule for that product hence in general the demand functions for product characteristics cannot be consistently estimated by ordinary least squares market equilibrium results in a matching of characteristics of demanders and suppliers this matching restricts the use of buyer and seller characteristics as instruments when estimating demand and supply functions for product characteristics the paper develops these issues a stochastic structure for hedonic equilibrium models is then proposed identification results are presented and estimation procedures are outlined

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

the role of underground storage in the dynamics of the us natural gas market a threshold model analysis abstract natural gas is an important source of energy in the global economy hence understanding the drivers of its prices is of significant interest for the many economic agents this paper investigates the role of inventories for the dynamics of the u s natural gas market our contribution is twofold first within the threshold structural var framework we demonstrate that in a low inventory regime spot prices are more responsive to economic fundamentals in comparison to situation in which the inventories are high second we present evidence that the level of natural gas inventories have a significant effect on the relationship between spot and futures prices