urban energy flow processes in the beijing tianjin hebei jing jin ji urban agglomeration combining multi regional input output tables with ecological network analysis abstract regional disparity is due to economic development physical geography and lifestyle jing jin ji urban agglomeration is advocating integrated development but its development is not so smooth the goals of this research are to identify the energy utilization characteristics of the three regions and their ecological roles and to promote the integrated development of this agglomeration system to do so we used the concept of urban metabolism and abstracted sectors and energy flows as nodes and paths in a network model based on multi regional input output tables in china in 2002 and 2007 the monetary values in the tables can be converted into physical units furthermore combining these tables with ecological network analysis can assess the indirect energy consumption of each sector then its embodied energy consumption will be accounted for also this method can reflect the roles producer or consumer of the three regions and of the five sectors in each region in regional energy exchanges the results showed that hebei had the largest embodied energy consumption in both years with beijing coming second the ecological roles of the three regions did not change greatly between 2002 and 2007 hebei acted as a producer and beijing and tianjin served as consumers exploitation relationships were dominant in both years this analysis provided insights that will support planning to adjust the industrial structure and future integrated development of the agglomeration

risk aversion and the recommended hedging ratio in a recent article in this journal kahl reviewed the existing literature on the determination of optimal futures and cash market positions the optimal hedging ratios were found to depend on whether the cash position was treated as endogenous or predetermined and some general implications were set forth the surprising conclusion was that the optimal hedging ratio is independent of the individual s risk aversion even though the optimal positions in the cash and futures markets are themselves not independent of the risk parameter kahl demonstrates that this conclusion

natural gas futures bias predictive performance and the theory of storage this study reports several empirical findings concerning natural gas futures prices first spot and futures prices are non stationary and the observed trends are due to positive drifts in the random walk components of the prices rather than possible deterministic time trends second market forecast errors are stationary third futures are less than expected future spot prices so that futures are backwardated fourth the bias in the futures prices is time varying fifth futures have statistically significant market timing ability despite the bias in the magnitude forecasts finally the data lends partial support to the cost of carry theory of the basis determination

the role of market expectations in commodity price dynamics evidence from oil data abstract this paper examines the contribution of market expectations to commodity price dynamics it proposes a dynamic competitive storage framework with an explicit expectations shock along with concurrent shocks to study the commodity price movements this allows for a refined analysis of the expectations effect on price and inventory and the estimation of the expectations applied to the world crude oil market it finds that the contribution of market expectations to the crude oil spot price movements is limited from 1987 to 2014

agricultural price instability a survey of competing explanations and remedies there are two explanations for agricultural price dynamics one follows cobweb logic and models fluctuations driven by expectation errors but emphasises that these expectations create complex dynamics and possibly chaos the other stems from the rational expectations tradition of dynamics driven by real shocks the empirical evidence tends to support the latter but is not conclusive the rational expectations model generates an optimal dynamic path from which no improvement can be expected from public intervention however if we take account of all the potential market failures in agricultural markets and especially in developing countries this conclusion might require some qualifications although an appropriate policy design for stability has still to be achieved this paper surveys the positive and normative literature on agricultural prices highlighting empirical evidence and identifying remaining unresolved issues

dynamic perspectives on agricultural policy issues among the innovators fred waugh was one of the most prolific he made pioneering contributions in linear programming statistics and econometrics demand analysis the welfare effects of price risk and the analysis and explanation of commodity cycles as a research leader mentor and teacher at the usda he left his mark on the work of later generations of researchers i find myself no exception as will become clear from what i have to say in this paper even though i never met him in person my work has been influenced by what he wrote and by what his students wrote and taught among the many topics that interested waugh were the dynamics of free market behavior and the implications for policy formation in this paper i consider models of markets in which the dynamics run in two directions forward from current conditions to expectations of future prices and back from price expectations to current decisions both types of linkages can be crucial in competitive models of agricultural production in which land has a prominent role as the quintessential fixed asset a central challenge of market analysis from waugh s time till now has been to infer from market observations whether markets are behav

evolution of the economics of agricultural policy agricultural economists helped develop farm programs to respond to the dire economic situation of the 1920s and 1930s some early authors appreciated that such policies created problems in markets for commodities and inputs over time our understanding of agricultural issues and policies has deepened through the application of improved models and tools of analysis to more extensive data we have developed better answers to old questions and have responded to changing policy instruments market contexts and policy concerns this article traces the evolution of our deepening economic understanding of the causes and consequences of agricultural policy

computational economics and economic theory substitutes or complements abstract this essay examines the idea and potential of a computational approach to theory discusses methodological issues raised by such computational methods and outlines the problems associated with the dissemination of computational methods and the exposition of computational results we argue that the study of a theory need not be confined to proving theorems that current and future computer technologies create new possibilities for theoretical analysis and that by resolving these issues we will create an intellectual atmosphere in which computational methods can make substantial contributions to economic analysis

a simple model of endogenous agricultural commodity price fluctuations with storage a debate has been raging for centuries regarding the effects of interannual storage on commodity prices most analysts consider storage to function as a price stabilizer while others place it at the core of an explanation of intriguing features of commodity price series such as skewed distributions most studies have been developed in the context of the theory of competitive storage where random shocks affect supply or demand recently the endogenous chaotic behavior of markets has become another possible hypothesis regarding the origin of commodity price fluctuations we develop a nonlinear cobweb model with intra and interannual storage risk averse agents and adaptive expectations like the theory of competitive storage this nonlinear cobweb model with storage can reproduce some of the stylized facts of agricultural commodity prices autocorrelation of first rank low kurtosis and skewness in addition the effects of storage on price variation are mixed in the presence of interannual storage chaotic price series show less variation compared to a situation without interannual storage but we find that storage contributes to the endogenous volatility of prices by making chaotic dynamics more likely

interest profits and suboptimality in a demand constrained macro model keynes argues that under pessimistic expectations investment demand falls short of full employment savings consequently income adjusts to bring savings into line with investment resulting in unemployment and or excess capacity classical theory as reconstituted in postwar textbooks counters that investment and full employment savings are equilibrated by adjustment of the interest rate thus current output will obtain its optimal level at full employment and full capacity despite pessimistic expectations of future demand the only way this can fail is if some type of wage or price rigidity prevents the stock of real money balances from accommodating the demand for them at the fullemployment interest rate fig i illustrates the keynesian and classical views in a traditional loanable funds diagram here the full employment supply of savingsis given by s investment demand under optimistic expectations is i and the full employment interest factor unity plus the interest rate is r pessimistic expectations shift investment demand to it reducing the full employment interest factor to r in the classical model or reducing employment income and hence savings to s in the simplest keynesian model general equilibrium theory provides a third view on interest rate determination here competition over prospective profits leads the interest rate to adjust to the return on capital adjusted for risk so prospective profits are eliminated provided capital is mobile to reconcile this view with either the keynesian or classical view depicted in fig i it should first be noted that the general equilibrium model of interest rates is a multi period model while the textbook models of fig i are not they are one period models with views of the future imprecisely summarised in the investment demand function furthermore in those models views of the future are not analysed for prospective profits or their consequences graphically the inframarginal triangle between the investment demand curve and the interest rate line is not analysed or explained how can such prospective profits survive competitive activities the present paper proposes to examine this issue in as simple a model as possible the key simplifications are as follows first the simplest multi period

the time pattern of hedging and the volatility of futures prices the paper proposes a multi period model of hedging which allows for a futures position to be revised within the cash market holding period within this framework we assess the robustness of the two period theory of hedging when generalized to many periods we characterize the normal time path of a hedge and the way it is affected by the requirement that futures accounts mark to market daily finally we show how the resolution of production uncertainty over time affects hedging behavior and determines the volatility of futures prices in the large literature on hedging in futures markets the principal analytical accounts of hedging are framed in a two trade date setting an agent commits himself now to a future purchase or sale of a good whose cash price later is uncertain this risk is hedged by purchase or sale of an appropriate number of futures contracts and holding this futures position until the cash transaction is realized in the present paper we formulate a multi period model of hedging which allows for the futures position to be revised within the cash market holding period the resulting analysis captures an important institutional reality that is absent in a two trade date model namely the fact that the day to day fluctuations of the futures price will generate a series of random cash flows over the period during which a futures position is held this is due to the requirement that futures accounts mark to market daily within this framework we address a number of issues first we assess the robustness of the two period theory of hedging when generalized to many periods second we characterize the normal time path of a hedge and contrast futures and forward contracts from the perspective of an individual hedger finally we show how the resolution of production uncertainty over time affects hedging behaviour and determines the volatility of futures prices while the literature on asset demand in a multiperiod setting is large futures markets are specifically treated in a limited number of studies grauer and litzenberger 1976 are concerned principally with characterizing the relation of spot and futures prices in a market for a storable periodically produced commodity they offer a rationale for positive stock holding in markets where spot price exceeds the futures price richard and sundaresan 1980 are also concerned primarily with characterizing price behaviour since they posit identical consumers in equilibrium individual holdings of futures are zero there is no hedging activity in the sense that we understand it breeden 1980b analyzes the optimal futures position sizes in a multiperiod setting his framework is more general than ours in that his is a multi good multi asset model where preferences

taxing fossil fuels under speculative storage long term environmental consequences of taxing fossil fuel usage have been extensively studied in the literature however these taxes may also impose several short run macroeconomic policy challenges the nature of which remains underexplored this paper investigates the mechanisms through which environmental taxes on fossil fuel usage can affect the main macroeconomic variables in the short run we concentrate on a particular mechanism speculative storage formulating and using a dynamic stochastic general equilibrium dsge model calibrated for the united states with an explicit storage facility and nominal rigidities we show that in designing environmental tax policies it is crucial to account for the fact that fossil fuel prices are subject to speculation the existence of forward looking speculators in the model improves the effectiveness of tax policies in reducing fossil fuel usage improved policy effectiveness however is costly it drives inflation and interest rates up while impeding output based on this tradeoff we seek an answer to the question how monetary policy should interact with environmental tax policies in our dsge model of fossil fuel storage we show that in an environment with no speculative storers monetary policy should respond to output along with cpi inflation in order to minimize the welfare losses brought by taxes however when the storage facility is activated responding to output in the monetary policy rule becomes less desirable

estimation of dynamic nonlinear rational expectations models of primary commodity markets with stochastic dynamic programming and disequilibrium maximum likelihood methods are combined to estimate a dynamic nonlinear rational expectations model of a market for a storable primary commodity the estimation model captures the inherently nonlinear structure of private stockholding dynamics the disequilibrium effects of government buffer stock intervention and the impact of price expectations and risk on private supply and stockholding decisions copyright 1993 by mit press

risk premium in the uk natural gas forward market this report investigates the uk natural gas market and tests whether it is a fair game efficient forward market using forward contracts ranging from one to five months time to delivery the forward and spot price series are separately non stationary but cointegrated furthermore the forward prices are biased predictors of both the future spot and the 1 month ahead forward price the risk premium on the forward prices is positive as opposed to the us gas market where the risk premium was found to be negative in similar work moreover the analysis reveals that the storage model is an incomplete model for the relationship between the spot and forward prices however storage has a clear effect on this relationship an effect that appears to be non linear

detecting spot price forecasts in futures prices futures markets are often described as having two important social functions first they facilitate the transfer of commodity price risk and second they provide forecasts of commodity prices the evidence that futures markets transfer price risk is irrefutable however there is some debate about the markets forecasting ability in particular forecasts based on the current spot price are often as good as those based on the futures price some economists cite a failure to detect superior forecast power in futures prices as evidence of market inefficiency see e g leuthold 1974 and martin and garcia 1981 there are at least two other explanations first there may be nothing for the futures market to forecast if the current spot price equals the true expectation of the future spot price the futures market cannot provide a better forecast second a superior futures market forecast may be obscured by the unexpected component of the realized spot price the true expectation of the future spot price is unobservable one must approximate this expectation with the actual future spot price

efficient mechanisms for access to storage when competition in gas markets is imperfect abstract scarce storage capacity and distortions in access to storage can lead to market foreclosure in liberalized gas markets we consider rules currently adopted in europe for storage allocation and discuss efficient rationing mechanisms as based on the value of storage when other flexibility inputs are partially available we initially analyze productive efficiency issues without explicitly considering vertical restraints we then assume imperfect competition in the downstream market for gas supplies given the availability of storage capacity upstream and analyze strategic behavior in a two stage model in this framework we compare regulated storage tariffs coupled with a centralized rationing mechanism with storage auctions finally we consider the allocation of storage that arises from welfare maximization by a benevolent social planner we find that it is usually optimal to maximize the amount of storage capacity allocated to new entrants in liberalized gas markets storage auctions deviate from the optimal mechanism but still afford greater efficiency than do rules that allocate storage capacity independently of its value furthermore storage allocation appears to be a powerful mechanism with which to improve competition and efficiency in gas markets

soybean inventory and forward curve dynamics we present two results concerning soybean prices first we exhibit a simple relationship between stocks and price volatility the observation of an increasing price volatility with decreasing inventory is often mentioned in the literature but has so far been documented using a proxy for inventory see fama and french 1987 1988 litzenberger and rabinowitz 1995 instead we reconstruct a yearly quarterly and monthly database of worldwide soybean inventories using aggregate data from the united states brazil and argentina we show that under all time scales price volatility is an increasing linear function of inverse inventory which we term scarcity second we show how the addition of the factor scarcity in a state variable approach to the dynamics of the term structure of soybean forward prices improves the quality of the fit we document this property on a 25 year database of cbot futures contracts and show that the superior accuracy also affects long maturity futures contracts an important property for the valuation of long term origination contracts between producing countries and the agrifood industry

evaluating the economic cost of natural gas strategic storage restrictions the european commission wants to implement a single market for gas one of the components of this market is a regulated provision for security of supply which consists of rules for the implementation and use of a given reserve stock of gas we investigate the impact of this policy on the profitability of a storage operator using data from denmark and italy keeping storage capacity constant the costs of the strategic stock are around 20 of the value of the storage market for denmark and 16 for italy this cost is due to the inability to extract arbitrage profits from the captive stock furthermore the strategic storage restriction induces behavior that would virtually never be replicated by a private storage operator in an unconstrained market in particular in the first 6 months of the year when unconstrained firms empty their reservoirs much faster suggesting the strategic restriction is unnecessarily distorting the market c 2010 published by elsevier b v less

a commodity price process with a unique continuous invariant distribution having infinite mean we present a model of a storable commodity with a price process different from those usually associated with agricultural commodities or exhaustible resources this model has positive probability of zero output for consumption equal to zero price is infinite in any initial period with finite price the path of expected prices conditional on current information approaches infinity at a rate determined by the cost of storage and the variance also approaches infinity price is expected to fall with probability one in finite time successive price realizations are always correlated storage remains strictly positive and expected consumption exceeds a strictly positive bound there is a continuous limiting invariant distribution of price with infinite mean k

the welfare effects of the introduction of storage this paper examines the welfare effects of introducing storage into a market with stochastic supply in which all agents are competitive profit maximizers with rational expectations these welfare effects are the net result of the initial increase in demand for stock building and the partial and asymmetric reduction in the dispersion of consumption brought about by storage the distributional impacts depend crucially on the information available to producers before storage is introduced the elasticity of supply the specification of the consumption demand curve and the cost of storage

dynamic programming models and algorithms for the mutual fund cash balance problem fund managers have to decide the amount of a fund s assets that should be kept in cash considering the trade off between being able to meet shareholder redemptions and minimizing the opportunity cost from lost investment opportunities in addition they have to consider redemptions by individuals as well as institutional investors the current performance of the stock market and interest rates and the pattern of investments and redemptions that are correlated with market performance we formulate the problem as a dynamic program but this encounters the classic curse of dimensionality to overcome this problem we propose a provably convergent approximate dynamic programming algorithm we also adapt the algorithm to an online environment requiring no knowledge of the probability distributions for rates of return and interest rates we use actual data for market performance and interest rates and demonstrate the quality of the solution compared to the optimal for the top 10 mutual funds in each of nine fund categories we show that our results closely match the optimal solution in considerably less time and outperform two static newsvendor models the result is a simple policy that describes when money should be moved into and out of cash based on market performance

the effects of commodity price stabilization programs in this paper the authors analyze the effects of commodity programs in which the government attempts to support and stabilize price through open market purchases and sales specifically they as sess the effects of such programs on the u s soybean market using a rational expectations model that allows for private storage expected price responsive production and arbitrary support and release price s a salient feature of the model is that private storage and product ion behavior adjusts to changes in government policy stochastic simu lations of the market model demonstrate that price stabilization prog rams can reduce long run market price and destabilize producer revenu e copyright 1988 by american economic association

speculative intensity and spot and futures price variability this paper develops a simultaneous stochastic rational expectations model of futures and spot price determination using the model we find that increases in what we term speculative intensity increase spot price variability arising from storage cost shocks but decrease spot price variability arising from demand shocks in contrast increases in speculative intensity unambiguously decrease futures price variability regardless of the underlying source of disturbances we are able to develop these comparative static results because the model has a unique equilibrium

welfare implications of price stabilization with monopolistic trade the welfare effects of domestic and international price stabilization are examined and then compared employing a two country model where one country exercises market power through continuous optimal trade restriction while the other behaves competitively the two types of stabilization have quite different implications on the distribution of welfare between and within countries the country exercising market power gains from domestic price stabilization regardless of the source of instability but the government and private producers and consumers are affected differently the country facing trade restriction can exercise some countervailing power by stabilizing international price fluctuations resulting from internal disturbances early studies of the welfare effects of price stabilization have adopted a perfectly competitive framework massell 1969 demonstrated that while price stabilization increases welfare to society its effects on individual groups depend crucially on the source of instability consumers producers gain from price stabilization if price fluctuations arise from

price stabilization using buffer stocks abstract the price stabilization problem is stated and solved for a nonlinear cobweb model with government stocks it is shown that if the storage capacity for the commodity is sufficiently large then there exists a simple stabilization policy called the keep supply at equilibrium kse policy such that the equilibrium price is a global attractor for the corresponding closed loop system in addition it is shown that if the government approximates the equilibrium supply with the average supply stabilization is guaranteed we refer to this policy as keep supply at average ksa

the empirical merit of structural explanations of commodity price volatility review and perspectives this paper presents both the history of and state of the art in empirical modeling approaches to the world commodity price volatility the analysis builds on the storage model and key milestones in its development specifically it is intended to offer a reader unfamiliar with the relevant literature an insight into the modeling issues at stake from both a historical and speculative viewpoint the review considers primarily the empirical techniques designed to assess the merits of the storage theory it does not address purely statistical approaches that do not rely on storage theory and that have been studied in depth in other streams of the commodity price literature the paper concludes with some suggestions for future research to try to resolve some of the existing empirical flaws and hopefully to increase the explanatory power of the storage model

the incidence of market stabilising price support schemes the introduction of a stabilization scheme can raise or lower the wealth of initial owners of land and commodity stocks substantially even if the are risk neutral the incidence consists of the capitaliz ed value of the revenue changes along the path to the new stochastic steady state by ignoring the dynamic path traditional comparative statics understates the benefits to initial asset holders because of differences in dynamic paths destruction of the commodity can have a lower marginal deadweight loss than a public bu ffer stock and deficiency payments can be especially attractive when the variability is exogenous to the domestic market copyright 1988 by royal economic society

food security and storage in the middle east and north africa in times of highly volatile commodity markets governments often try to protect their populations from rapidly rising food prices which can be particularly harsh for the poor a potential solution for food deficit countries is to hold strategic reserves which can be called on when international prices spike but how large should strategic stockpiles be this paper develops a dynamic storage model for wheat in the middle east and north africa mena region where imported wheat dominates the average diet the paper uses the model to analyze a strategy that sets aside wheat stockpiles which can be used when needed to keep domestic prices below a targeted price this paper shows that if the target is set high and reserves are adequate the strategy can be effective and robust contrary to most interventions strategic storage policies are counter cyclical and when the importing region is sufficiently large a regional policy can smooth global prices this paper shows that this is the case for the mena region nevertheless the policy is more costly than the pro cyclical policy of a targeted intervention that directly offsets high prices with a subsidy similar to food stamps

directly unproductive profit seeking dup activities this paper propses directly unproductive profit seeking dup activities as a general concept that embraces a wide range of recently analyzed economic activities including the subset of rent seeking activities considered by krueger it then proceeds to provide a synthesis and generalization of the welfare theoretic analysis of such activities by developing a fourfold categorization of cases depending on the levels of distortions before and after the dup activity thus a unification and overview of the subject are achieved

testing for market timing ability abstract in this paper we examine the henriksson merton test of market timing and its potential usefulness in evaluating investment advice the paper proposes a natural extension of the test that is valid under more general assumptions about the distribution of asset returns we show that the henriksson merton test and its more general counterpart are special cases of standard tests of market rationality and efficiency both tests are applied to a group of foreign exchange advisory services

testing for forward rate unbiasedness on regression in levels and in returns several recent empirical studies have been forced to reject exact 1 1 cointegration between spot and forward exchange rates theoretically this is shown to provide a possible explanation for the puzzling negative estimates reported from spot return forward premium regressions in particular the coefficient in this regression has a unit root component in its limit distribution that imparts a bias and skewness to the estimator simulations are used to demonstrate how even very small deviations from 1 1 cointegration can result in substantial bias the empirical evidence suggests that the implied dickey fuller type terms do exhibit a downward bias yet are of insufficient magnitude to fully account for the puzzling regression coefficients mentioned above

which way the natural gas price an attempt to predict the direction of natural gas spot price movements using trader positions abstract this research provides a method of predicting direction of spot price movements in the natural gas market for the month succeeding from market participants positions in the futures market cumby and modest cumby r e modest d m 1987 testing for market timing ability a framework for forecast evaluation journal of financial economics 19 169 189 provide the backdrop for analyzing the futures market positions of large hedgers and speculators to arrive at conclusions of market price movements in the spot market this methodology is suggested as a means for municipalities entering the natural gas market to improve upon their ordering of quantities of gas for the ensuing months in order to take advantage of possibly foreseeable price trends

the value of public information in storable commodity markets application to the soybean market this article provides a framework to estimate the potential effects and benefits of the provision of market information in storable commodity markets this framework is applied to the case of production forecasts for the soybean market a rational expectations storage model of the global soybean market accounting for both inter annual and intra annual market dynamics is built shocks that occur between planting and harvesting affect the size of the potential harvest estimates of the size of these shocks are reported publicly and affect the market equilibrium through adjustments to stock levels by varying counterfactually the observability of seasonal shocks we can estimate the efficiency gains related to the availability of advance information they are equivalent to 2 of storage costs the reduction of stock levels being the main channel explaining the welfare gains the presence of advance information has a limited effect on inter annual price volatility but redistributes price volatility during the season increasing it just before harvest when almost all news has been received and stocks are tight and decreasing it after harvest the effect of news shocks is stronger on higher order moments of the distribution with a strong decrease in skewness and kurtosis related to the lower frequency of price spikes

demand uncertainty and price stabilization price stabilization is an important policy goal of government intervention in competitive markets these policies are primarily directed at raising producer income and stabilizing market prices at levels acceptable to consumers and producers fox 1956 turnovsky 1978 newbery and stiglitz 1979 many of the stabilization policy results have been developed from the study of agricultural commodity markets in these markets prices tend to be highly variable due to uncertain and inelastic supply and demand schultz 1945 gardner 1981

market intervention and international price stability a simple model is used to analyze the impact of domestic policies on international price stability the impact of policies on the variance of world prices depends on the type of measures used policy parameters and whether instruments are used singly or in combination domestic agricultural policies are normally assumed to destabilize world prices the model demonstrates that this may not occur particularly when multiple interventions are used currently there is considerable emphasis on the reduction of protection how this is achieved may have important implications for the stability of international prices as well as their average level

export taxes versus buffer stocks as optimal export policies under uncertainty abstract optimal state dependent export taxes and costly to store buffer stocks are compared in their welfare implications for an exporter possessing monopoly power in the international trade of a volatile commodity optimal stochastic control is used to derive the optimal buffer stock rules it is shown that if the internal and external fluctuations facing the exporter are large if the storage costs are low and if the price elasticity of export supply is small relative to that of export demand the exporter would gain more from a buffer stock than from a optimal export tax world welfare is always increased by buffer stocks as opposed to tariffs and under some conditions the foreign country might also benefit and hence not retaliate

learning and the monetary policy strategy of the european central bank abstract this paper examines the welfare implications of alternative inflation targeting proposals for the monetary policy of the european central bank we assume that policy makers have to learn the laws of motion of inflation in an economy characterized by stickiness in domestic price setting behavior and subjected to recurring shocks to productivity exports and foreign price we find that a switch from an asymmetric inflation targeting strategy to an symmetric makes little difference in welfare payoffs but it comes at a cost of much higher interest rate variability we also find that there are practically no welfare gains from switching from an inflation targeting strategy based on the harmonized index of consumer prices hicp to a strategy based on the domestic price component of the hicp

food security policy in a stochastic world abstract food security may be increased by variance reducing strategies by food aid or by development strategies this paper uses a korea cge model subjected to random fluctuation in world prices and domestic food productivity to evaluate these policies we find that poverty reducing development strategies are the most food security strategies

global biofuels key to the puzzle of grain market behavior these jumps in the prices of these three major grains have also revealed the these jumps in the prices of these three major grains have also revealed the chaotic state of economic analysis of agricultural commodity markets economists chaotic state of economic analysis of agricultural commodity markets economists and scientists have engaged in a blame game apportioning percentages of responand scientists have engaged in a blame game apportioning percentages of responsibility for price spikes to bewildering lists of factors which include a surge in meat sibility for price spikes to bewildering lists of factors which include a surge in meat consumption caused by unprecedented increases of income of the vast populations consumption caused by unprecedented increases of income of the vast populations of china and india idiosyncratic regional droughts and fi res speculative bubbles a of china and india idiosyncratic regional droughts and fi res speculative bubbles a new fi nancialization of grain markets the slowdown of global agricultural research new fi nancialization of grain markets the slowdown of global agricultural research spending jumps in costs of energy and fertilizers shifts in interest rates the decline spending jumps in costs of energy and fertilizers shifts in interest rates the decline of the dollar the surge in biofuels demands bans on genetically modifi ed plants of the dollar the surge in biofuels demands bans on genetically modifi ed plants and climate change several observers have claimed to identify a perfect storm in and climate change several observers have claimed to identify a perfect storm in the grain markets in 2007 2008 a confl uence of some of the factors listed above the grain markets in 2007 2008 a confl uence of some of the factors listed above the continuing confused state of the economics of grain price volatility may the continuing confused state of the economics of grain price volatility may seem odd after all grain markets have many of the features of textbook competiseem odd after all grain markets have many of the features of textbook competitive models the products are relatively uniform their primary producers and tive models the products are relatively uniform their primary producers and ultimate consumers are atomistic price takers prices and outputs in the united ultimate consumers are atomistic price takers prices and outputs in the united states and other developed countries are unusually well measured by the standards states and other developed countries are unusually well measured by the standards of most goods and services in the world economy with data freely available from of most goods and services in the world economy with data freely available from

efficient and competitive rationing abstract the contracts that interest us here are called priority service contracts the salient feature of such contracts is that they specify each customer s priority in obtaining service that is they specify the tank order in which a customer is served out of the available supply until all customers are served or supply is exhausted such contracts essentially establish queues for customers in section 1 the author provides some background about priority service section 2 formulates a basic model and offer several illustrations also describes two main examples that motivate the theoretical development section 3 derives some key results that show how the prices of priority service contracts are designed to induce customers to self select efficient service orders in section 4 the author discusses various ways that state enterprises can organize markets that implement priority service efficiently in section 5 we study the operation of competitive markets for priority service section 6 concludes with some summary remarks two themes are emphasized one is that a state enterprise can promote substantial efficiency gains by substituting priority service for absent spot markets the other is that oligopolistic firms may have insufficient incentives to offer efficient product diversity consequently allocative efficiency depends on entry of numerous firms even so dispersal of supplies among many firms can prevent productive efficiency when there are advantages from pooling supplies

some economics of seasonal gas storage we propose a model of seasonal gas markets which is flexible enough to include supply and demand shocks while also considering exhaustibility the relative performances of alternative policies based on price caps and associated measures or tariffs are discussed we illustrate with structural estimates on us data how this theory can be used to give insights into the intertemporal incidence of policy instruments

pricing and storage of field crops a quarterly model applied to soybeans this paper considers the role of competitive storage in markets for annually harvested field crops a quarterly model is presented that considers the allocative role of storage both within and between crop years rational price expectations are endogenous variables calculated by a recursive method forward stochastic simulations using the model generate data that can be used to characterize the distributions of the variables in the base case the model is assigned parameter values from a quarterly econometric model of the u s soybean market the results shed light on the distributions of the quarterly variables including the rational price expectations and show how these distributions are affected by changes in the carrying charge

market interventions international price stabilization and welfare implications the welfare effects of price stabilization are quantified under free trade and under distortionary policies when an exporting country protects domestic producers with price supports an importing country pursues a price fixing policy and a second importing country follows a free trade policy results show that distortionary interventions cause greater world price variability world gains from international price stabilization through a costless buffer stock scheme are higher under distortionary trade than under free trade

competitive pricing and storage under uncertainty with an application to the u s soybean market relative to a no storage regime competitive storage of soybeans greatly reduces the variance of both annual prices and annual consumption variance of production is increased expected values of price consumption and production are not affected the government could reduce price variance by about 70 percent of its competitive level through subsidizing storage activity the research procedure is based on a model of competitive storage under conditions of uncertainty and assuming rational expectations farm level demand and supply functions are estimated simulation is used to generate large random samples of values for soybean prices consumption production and year end stocks

central bank learning terms of trade shocks and currency risk should only inflation matter for monetary policy this paper examines the role of interest rate policy in a small open economy subject to terms of trade shocks and time varying currency risks the private sector makes optimal decisions in an intertemporal non linear setting with rational forward looking expectations in contrast the monetary authority chooses an optimal interest rate reaction function given a loss function that is conditional on the state of the economy and given its least squares learning about the evolution of inflation and exchange rate depreciation the simulation results of the effects of different policy scenarios on welfare show that on balance the preferred stance should be strict inflation targeting

business cycles and emission trading with banking abstract we propose an emission cap adjustment policy for an emission trading system ets that allows banking of allowances for later use and faces business cycle uncertainty the forward looking banking decisions cause a commitment problem with respect to regulator s next period allowance supply decision we tackle the commitment problem by focusing on the markov equilibrium of the policy the equilibrium policy has a surprisingly simple structure combining features from both price and quantity instruments the regulator s ability to choose a new cap for each period does not render banking obsolete but on the contrary makes banking an integral part of the equilibrium policy using data from the eu ets to calibrate the model we solve the markov equilibrium policy for the case of carbon emissions regulation and compare markov policies with and without the possibility to bank allowances a counterfactual analysis of the eu ets during the period of 2009 2013 shows that the optimal markov policy would have led to a steadier allowance price level and a stricter emission regulation than what was actually observed in the eu ets

four approaches to commodity market stabilization a comparative analysis the effects of four alternative price stabilization programs for soybeans are compared using a rational expectations model and simulation for a given government expenditure subsidized private storage is the most efficient way to stabilize market price for a given deadweight loss a program of direct payments is the most efficient stabilizer of the effective farm price this program does not stabilize market price all four programs including a buffer stock program and one involving both direct payments and buffer stocks tend to destabilize quasi rent programs that involve an initial build up of stocks increase producer benefits and hurt consumers

the working curve and commodity storage under backwardation there remains controversy over whether the empirical curve relating intertemporal commodity price spreads and stocks originally drawn by holbrook working in 1933 i e the working curve is a valid stylized fact in commodity markets the core of the controversy is the portion of the curve representing commodity stocks under backwardation in this article we analyze the original data used by working plus more disaggregated numbers we find that the working curve is indeed valid the diversity of stockholders and different stockholding motives most likely explain the empirical working curve relationship

a quantile autoregression analysis of price volatility in agricultural markets this paper investigates the dynamics of agricultural price volatility based on a quantile autoregression qar model the qar model provides a flexible representation of the distribution of price and its dynamics the approach is applied to u s wheat and corn markets over the period of 1980 2017 this period is of significant interest as it covers important changes in agricultural policy and increased reliance on markets the price analysis is conducted conditional on stocks held in the previous period we show how increasing previous stocks shift the price distribution to the left and decreases the odds of facing price spikes by shifting down the upper tail of the price distribution our analysis also examines the effects of changing public stocks on prices for both wheat and corn this reflects changing agricultural policy contrasting the 1980s when public stocks were relatively high with the post 2005 period when public stocks became zero we document how higher public stock ratio during the previous period did not lower the odds of facing price spikes applied to the wheat and corn markets we also uncover evidence of local dynamic instability in the upper tail of the price distribution suggesting that price instability becomes more pronounced when previous stocks are low

the economic role of commodity storage one of the earliest and most successful exainples of economic policy is the oftquoted biblical account of joseph s interpretation of the pharoah s dream joseph foretold that seven years of abundant harvests would precede seven years of drought and recommended that the pharoah accumulate grain during the good years since that time the central role of storage in stabilising the economy in the face of exogenous disturbances has been obvious but our understanding of the nature of that role has not greatly advanced without divine assistance in forecasting stochastic production the storage decision is considerably more complex than the one joseph faced and the role of storage quite different in fact several commonly held impressions about the role of storage of commodities such as grains are incorrect rather than stabilising production storage actually accentuates its variability rather than causing a mean price preserving decrease or a mean output preserving decrease in the dispersion of price storage generally causes a more complex modification of the distribution of price rather than being most effective at eliminating short falls in consumption storage actually is more effective at eliminating the incidence of exceedingly high consumption in this paper we explore the role of storage in a model where production is stochastic and both production and storage are performed by competitive profitmaximisers who form rational expectations about the returns to their activities we derive the subtle but very important interactions among production price expectations and storage which simpler models cannot capture finally we make a comparative statics assessment of the distributional implications of storage these results while confirming the importance of the specification of the demand function and the supply elasticity identified in recent analytical studies e g wright i979 and newbery and stiglitz i979 are surprisingly favourable to consumers considering the asymmetric nature of the effects of storage on consumption and price storage is simply a productive activity one that transfers a commodity from one period to the next like other forms of production it is costly the total cost of storing an amount st from period t to period t i is as of period t i

the vulnerability of price stabilization schemes to speculative attack this paper examines the effects of government attempts to stabilize the prices of commodities by use of buffer stocks agricultural goods subject to supply uncertainty as well as depletable resources are considered in each case it is shown that the resulting rational expectations competitive equilibrium contains a speculative attack a situation where the entire government stock is suddenly purchased by previously inactive speculators the analysis is applied to the historical attempt to peg the gold price which caused the attack of 1968 the insights gained and the methodology developed also apply to the various international agreements to impose bans on commodity prices which have been proposed by the united nations conference on trade and development

inflation targeting learning and q volatility in small open economies this paper examines the welfare implications of managing asset price with consumer price inflation targeting by monetary authorities who have to learn the laws of motion for both inflation rates the central bank can reduce the volatility of consumption as well as improve welfare more effectively if it adopts state contingent taylor rules aimed at inflation and q growth targets in this learning environment however under perfect model certainty pure inflation targeting dominates combined consumer and asset price inflation targeting

interdependence between energy and metals in china evidence from a nexus perspective abstract the lack of knowledge about the interdependence between energy and metals hinders sustainable management of the two essential resources in this study a hybrid framework which combines the environmentally extended input output analysis eeioa and ecological network analysis ena was constructed to evaluate energy metals use and flows within china s economic system in 2012 from the perspective of nexus furthermore the structural properties of nexus networks and mutual relationships between sectors were simultaneously explored the results show that hybrid energy direct energy metals related energy and hybrid metals direct metals energy related metals used by all the sectors were 1 22 and 1 05 times their direct energy and direct metals use respectively in both hybrid energy and metal networks mining industry and construction industry had a strong control and dependence relationship over 50 with other sectors reflecting the tight inter sectoral connection between energy use and metals use therefore stabilizing these main control and dependence pathways is essential to the system s effective operation in addition alleviating excess industrial capacity and optimizing economic structure are two effective measures to improve the currently low energy metals circulation efficiency within china s economy system by revealing the nexus between energy and metals in china this study provides important policy implications for trade offs and synergies between energy and metals use

does the european natural gas market pass the competitive benchmark of the theory of storage indirect tests for three major trading points this paper presents the first comparative analysis of the relationship between natural gas storage utilization and price patterns at three major european trading points using two indirect tests developed by fama and french 1987 1988 that are applied in other commodity markets we impose the no arbitrage condition to model the efficiency of the natural gas market the results reveal that while operators of european storage facilities realize seasonal arbitrage profits substantial arbitrage potentials remain we suggest that the indirect approach is well suited to provide market insights for periods with limited data we find that overall market performance differs substantially from the competitive benchmark of the theory of storage

quantifying the sustainability of economic resource networks an ecological information based approach abstract sustainability as a concept has multiple disparate perspectives stemming from different related disciplines which either maintain ambiguous interpretations or concentrate on metrics pertaining to single aspects of a system given the embedded multi dimensionality of sustainability systemic approaches are needed that can cope with interactions of different dimensions past efforts for measuring sustainability holistically have taken an accounting approach based on the availability and efficiency of resource flows however an accounting approach fails to fully incorporate the intensive parameters pertaining to sustainability an ecological information based approach is a promising holistic measurement which incorporates both intensive and extensive dimensions of sustainability this paper evaluates this approach by applying it to six economic resource trade flow networks virtual water oil world commodity oecd bric commodity oecd bric foreign direct investment and iron and steel from the perspective of biomimicry it appears that these networks can achieve higher levels of efficiency without weakening their robustness to resource delivery the trends of measured efficiency and redundancy of the studied networks are demonstrated to be useful in reflecting long term changes while the trend in robustness levels were found to exhibit similar behavior to an ecosystem in its early phase of development

processing industry capacity and the welfare effects of sugar policies normally analysis of policies affecting commodities such as sugar employs long run comparative statics under certainty and ignores processing industries like cane sugar refining under the implicit assumption that the capital is malleable in both the short and long run we present a dynamic model calibrated to world sugar and solved with numerical dynamic programming that includes the specific capital of the refining industry when compared to an otherwise identical static model the dynamic model suggests that some 20 of welfare losses may be misattributed to cane sugar producers instead of refiners in contrast the difference between certainty and uncertainty proves to be unimportant

effects of exchange rate changes on u s agriculture a dynamic analysis an econometric model of the wheat corn and soybean markets is used to examine the dynamic effects of exchange rate fluctuation on u s commodity markets exports and agricultural prices are found to be sensitive to movements in the exchange rate while domestic factors such as disappearance and inventories are less sensitive but still responsive dramatic short run adjustments in prices and exports are followed by less dramatic but significant longer run adjustments thus the hypothesis of elastic response to the exchange rate seems particularly relevant for the short run

effects of pricing policy on seasonal storage of wheat in pakistan most studies of stockholding in less developed countries have concentrated on public interannual stocks a recent change in pakistan government policy for the pricing of wheat highlights the need to examine seasonal storage issues considering explicitly the effects of policy on the behavior of private agents who hold seasonal stocks of grain using h working s supply of storage theory and a simple monthly model implications of the policy change for fiscal cost private storage and government procurement are explored costs of the policy could be reduced dramatically by increasing marginally the gap between the procurement and release price expected cost to the consumer of a wider gap would be no larger than under the previous policy

risk and household grain management in developing countries a dynamic model is presented of a household s joint production storage and trade decisions when facing transaction costs and risk in prices and yields grain management decisions balance the goals of maximising profits and reducing consumption price risk model solutions calibrated to chinese data show that grain s consumption role makes it an attractive form of precautionary saving even when households have access to credit the joint nature of production and savings decisions limits the income loss associated with risk coping and the desire to store grain can explain why subsistence households are frequently net purchasers but rarely net sellers of grain

anti hoarding laws a stock condemnation reconsidered economists have regarded anti hoarding laws as irrational reactions to nonexistent monopoly in the storage of grain this paper shows that anti hoarding laws cannot be rationally directed against a monopolistic storer for he will always store less not more than would be stored under competition but seemingly perverse competitive storage in the form of excessive stockholding can arise when a price ceiling distorts the market additional public storage exacerbates this perverse private behavior and may even induce behavior that appears to be active market manipulation under such circumstances anti hoarding laws can be desirable second best measures

price volatility and banking in green certificate markets there is concern that prices in a market for green certificates gcs primarily based on volatile wind power will fluctuate excessively leading to corresponding volatility of electricity prices applying a rational expectations simulation model of competitive storage and speculation of gcs the paper shows that the introduction of banking of gcs may reduce price volatility considerably and lead to increased social surplus banking lowers average prices and is therefore not necessarily to the benefit of green producers proposed price bounds on gc prices will reduce the importance of banking and even of the gc system itself

policy options for stabilizing earnings in a speculative market a structural analysis abstract this paper examines the impact of price stabilization or price supports and different forms of supply controls on the earnings distribution in a speculative commodity market both strategies lead to a conflict in which greater earnings stability has to be brought with lower average earnings neither on its own can help reduce the probability of periods with loss earnings or large disturbances but it is shown how combinations of these two strategies may be used to gain stability while reducing those probabilities and maintaining the earnings level

evaluating the risk premium in the u s a natural gas market evidence from low price regime abstractin recent years the u s a natural gas market has seen enormous changes the expectations of abundant supply of shale gas and the slow u s a economic recovery have pushed gas prices below us 4 mmbtu although shale gas is a new promising source of unconventional energy investors face uncertain investment plans in this study we investigate the risk premium by comparing behaviour before and after the change point in agents risk perception unlike traditional empirical research on risk premium we use the parametric two factor model of schwartz and smith 2000 to evaluate the implied risk premium term structure from futures prices traded on the new york mercantile exchange nymex we compare our findings with other empirical results and find that the change point lies at the beginning of the low price regime when we compare periods before and after the change point we observe that the risk premium changed not only in sign but also in magnitude

the effects of price uncertainty on the factor choices of the competitive firm it is well known that if the price of a variable factor or of output is uncertain when the level of a quasi fixed factor must be chosen by a competitive firm the profit maximizing allocative choices differ from those made when all prices are fixed at their expected values the expected responses of input levels to price uncertainty depend on the characteristics of the production function but even their signs are difficult to determine empirically as they depend on among other parameters the third derivatives of the production function which are difficult to identify this paper shows that the response of the quasi fixed factor and the expected short run response of the variable factor are directly related to observable characteristics of the input demand and output supply functions but concentration on the responses of individual inputs provides only a partial view of the allocative effects of price uncertainty when the full effects on both factors are considered together both types of price uncertainty induce different biases in expected factor proportions relative to choices under certainty the directions of these biases cannot be inferred from results regarding the sign of the response of either factor viewed in isolation previous studies in this field include sandmo 11 batra and ullah 1 and holthausen 4 who showed that non neutral attitudes toward risk can affect the level of output and the amount of a quasi fixed input chosen by a firm faced with product price uncertainty stewart 12 showed a similar result for factor price uncertainty the above studies all assume explicitly or implicitly 6 4 that there is no reduction in price uncertainty between the time if any separating decisions on different inputs thus the usual distinction between short run and long run allocative decisions is ruled out turnovsky 13 showed that this assumption is crucial using a model which maintained an alternative assumption that firms could modify their planned output at additional cost after the selling price is known the effect of output price uncertainty on planned

access to natural gas storage facilities strategic and regulation issues abstract in this paper we analyze the strategic function of gas storage focusing on how gas storage decisions impact competition between gas companies on both spot and downstream markets using a two tier oligopolistic structure we first show that gas storage is actually used strategically even in a symmetric oligopolistic setting along the gas value chain storage is then a way to intensify competition on the spot market second we analyze the setting where a company has favored access to storage for example due to a historical monopolistic position and we analyze this as a leadership situation in the context of tpa regulation we then show that this setting compels the leader to adopt a strategic storage decision this strategy consists of levels of gas stored being greater than supplies available in the downstream market such a leader decision is part of a strategy to raise a rival s costs furthermore one can think that optimal regulation of the access to storage facilities would prevent such a behavior however especially when storage is not too costly we show that preventing a storage strategy for the leader is not optimal since the strategy helps to reduce the spot market price

the behavior of commodity prices in ethiopia in an attempt to identify price stabilization strategies and rationalize public intervention in buffering markets this article investigates the intertemporal dynamics of commodity prices in ethiopia a classical rational expectation model is modified to account for seasonal correlation of shocks model predictions are reduced to computable periodic threshold autoregression several nonlinearity tests are applied to detect threshold effects a regime switching normalized maximum likelihood method is formulated to estimate thresholds and threshold autoregression parameters using monthly data from ethiopia for the period 1996 2006 the result indicates the presence of periodic price thresholds that could be formed as a result of speculative storage comparison of price movements below and above thresholds indicates that prices are more correlated below the thresholds than above them however the effect on error variance is not very strong temporal arbitrage which is the gross return from speculative storage appears to be modest the long and short term implications of the findings are discussed within the context of ongoing policy debates

the prebisch singer hypothesis a reappraisal independent of stationarity hypotheses time series behaviour of the relative price of primary commodities raul prebisch i950 and hans singer i950 believed that the long term trend of primary commodity prices was negative the latter in an interesting discussion of the above quandary pp 482 3 viewed rises in primary commodity prices as purely temporary sources of surplus that offered short lived opportunities to increase industrial investment these opportunities were missed by private investors who instead increased primary sector investment in such circumstances because all private activity tends to be governed by the price

stocks to use ratios and prices as indicators of vulnerability to spikes in global cereal markets we identify critical stocks to use ratios surs for major grains and for an index of total calories from these grains the latter appears to be a promising indicator of vulnerability to large price spikes when the current price shows no cause for concern more generally our results suggest that stocks data though no doubt unreliable can be valuable complements to price data as indicators of vulnerability to shortages and price spikes

a two season agricultural household model of output and price uncertainty abstract this paper presents a two season model of a household s production consumption labor supply and storage decisions in an environment of output and price risk the analytical results in this study are markedly different from those of models prevalent in the mainstream of the agricultural household literature the empirical analysis that uses panel data from a village in india provides support for the theoretical results and underscores the seasonal dimension of the farmers choice problems the results also show that ignoring risk or risk averse preferences may introduce substantial downward bias in optimal response estimates

responsible mineral and energy futures views at the nexus societal prosperity is underpinned by access to the increasingly interdependent resources of minerals and energy in an era of mineral resource constraints and radical transition in the energy sector this paper reviews the extent to which a long term view of production and use is adopted in both fields a long term view including the mineral energy nexus is deemed to be necessary although not sufficient for managing future resource constraints and energy transitions alarmingly it identifies that the future of minerals resources and production is generally considered 5 10 years ahead rather than several decades or more as for energy additionally the sectors are generally studied independently rather than with a focus on the nexus with these findings as evidence of an unaddressed problem the paper then focusses on the current forces for change in the minerals industry namely community drivers regarding social licence to operate new technologies and consumer and government drivers on responsible minerals as discussions of sustainable development become displaced by the emerging discourse of responsible minerals what is adopted and discarded whilst responsible minerals considers chain of custody it does not adopt a long term view and overlooks the mineral energy nexus using three illustrative cases at the nexus of i rare earths renewables ii coal steel and iii uranium nuclear we extend the theoretical discussion on responsible with a range of contemporary examples from the perspectives of producing australia and consuming countries japan switzerland and propose a research agenda for an expanded notion of responsible minerals which recognises the complexity of the mineral energy nexus and connects it to progressing sustainable futures