a cointegration analysis of petroleum futures prices abstract this paper presents evidence concerning the number of common stochastic trends in a system of three petroleum futures prices crude oil heating oil and unleaded gasoline using daily data from 3 december 1984 to 30 april 1993 johansen s maximum likelihood approach for estimating long run relations in multivariate vector autoregressive models is used the results indicate the presence of only one common trend

market integration and price convergence in the european union abstract the implementation of international treaties in the european union was expected to promote integration of consumer markets using economist intelligence unit worldwide cost of living survey data i analyze the convergence of prices for a range of traded goods and find that large price differences remain across europe using high income non euro european countries as a control group i test the effect of the euro and the single european act on the convergence of prices within the european union using a difference in difference estimation strategy i find that the single european act rather than the euro reduced price differences and promoted market integration distinguishing between the two stages of the euro implementation shows increasing price divergence as a result of the common currency

are electricity prices affected by the us dollar to euro exchange rate the spanish case abstract the objective of this paper is to investigate the relationships between spanish electricity spot prices and the us dollar euro usd euro exchange rate during the period 2005 2007 taking into account the study of the association between dollar and oil prices in order to better understand the evolution of the former over time the first finding in this study is that spanish electricity spots prices the usd euro exchange rate and oil prices are cointegrated therefore there is a long run equilibrium relationship between the three variables short run relationships have been detected between oil prices and spanish electricity prices and usd euro exchange rate in the sense that spanish electricity prices and usd euro exchange rate are affected by oil prices in the short run there is a transmission of volatility between usd euro exchange rate and oil prices to spanish electricity prices so although spanish electricity prices are not affected in level by the movements of usd euro exchange rate they are in volatility in this kind of scenario the conclusions confirm that for countries so dependent on external causes as spain one possible solution for guarantying the energy security would be the promotion of the renewable energies therefore we cannot ignore the impact in the internal expenses of the cost of installation and generation of green energies so there must be a balance between the increase in renewables and the reasonable market price of the electricity

structural breaks dynamic correlations asymmetric volatility transmission and hedging strategies for petroleum prices and usd exchange rate abstract this paper investigates the influence of structural changes on the asymmetry of volatility spillovers asset allocation and portfolio diversification between the usd euro exchange market and each of six major spot petroleum markets including wti europe brent kerosene gasoline and propane using the bivariate dcc egarch model with and without structural change dummies the results provide evidence of significant asymmetric volatility spillovers between the u s dollar exchange rate and the petroleum markets moreover the model with the structural breaks reduces the degree of volatility persistence and leads to more appropriate hedging and asset allocation strategies for all pairs considered thus the findings have important implications for financial risk management

dynamic connectedness of oil price shocks and exchange rates abstract using a novel method of isolating the oil price shocks we study how different sources of oil price shocks are connected to exchange rates of major oil dependent countries using daily data from march 1996 to february 2019 we find that oil price shocks resulting from changes in demand and risk significantly contribute to variation in exchange rates while supply shocks have virtually no impact the connectedness of this relationship between oil price shocks and exchange rates has significantly increased after the global financial crisis we also find that oil price shocks do not explain the variation in exchange rate volatility but we document significant volatility connectedness among exchange rates our findings have important implications for policy makers and financial market participants

influential factors in crude oil price forecasting abstract this paper identifies factors that are influential in forecasting crude oil prices we consider six categories of factors supply demand financial market commodities market speculative and geopolitical and test their significance in the context of estimating various forecasting models we find that the least absolute shrinkage and selection operator lasso regression method provides significant improvements in the forecasting accuracy of prices compared to alternative benchmarks relative to the no change and futures based models lasso forecasts at the 8 step ahead horizon yield significant reductions in mean squared prediction error mspe with mspe ratios of 0 873 and 0 898 respectively we also document substantial improvements in forecasting performance of the factor based model that employs only a subset of variables chosen by lasso finally the time varying nature of the relationship between factors and oil prices is used to explain recent movements in crude oil prices

what happens when food marketers require restrictive farming practices the dimensions that define a food product have expanded rapidly to include characteristics of the production process marketing arrangements and implications that production and consumption of the product have for the environment some market intermediaries have responded by requiring that their suppliers abide by restrictive production practices we examine the economic effects of such restrictions and apply this analysis to limitations on the use of antibiotics in u s pork production results from conceptual and simulation analyses show that in the absence of demand growth less pork is sold due to higher costs in the restricted segment and both pork consumers on average and producers are harmed demand growth of between 6 11 from adding new consumers who will consume the restricted antibiotic free product but not the conventional product is needed to return consumer surplus to the level in the base case and between 2 4 demand growth was required to return producer surplus to base when restricted and conventional products are modeled using a vertical differentiation framework results depend importantly on the ease with which consumers can switch to a seller who offers their desired product type significant distributional impacts among consumers are present when switching costs are prohibitive

the response of real exchange rates to various economic shocks substantial fluctuations in real exchange rates i e deviations from purchasing power parity ppp which closely mirror movements in nominal rates have been one of the most notable international economic events since the breakdown of the bretton woods system dornbusch s disequilibrium theory 9 which presumes different speeds of adjustment in assets and goods markets offers an explanation for temporary deviations from ppp only models assuming ppp as a long run relationship have not been successful in interpreting the movements of the real exchange rates although studies conducted for countries experiencing high or hyper inflation provide evidence favoring ppp 42 30 29 the empirical evidence on ppp for industrialized low inflation countries is not generally favorable 1 this is consistent with the view that ppp may hold better in high inflation countries where the disturbances to their economies are mostly monetary in origin 31 123 24 but ppp may not hold well when the real disturbances which change equilibrium relative prices dominate statistical evidence indicates that the real exchange rates of many countries are likely to be nonstationary or have long memory that is changes in the real values of many currencies tend to persist for very long period of time this persistence implies that fluctuations in the real exchange rates are largely due to long lasting effect of real disturbances after revealing that ppp does not hold as a long run concept for several exchange rates flynn and boucher 12 121 suggest that one possible explanation is that there are time varying real factors that are omitted from the ppp relationship there are several well established reasons why the real exchange rates may change in response to real disturbances in the first place permanent exogenous shocks to the tradable sector of the economy call for changes in competitiveness for instance a rise in the real price of oil will worsen the balance of trade position of a net oil importing country and therefore call for a real depreciation of the currency of the country in order to improve its competitive position 32 second when countries are growing at different rates productivity bias will typically result in

causal flows between oil and forex markets using high frequency data asymmetries from good and bad volatility abstract this paper investigates the causal linkages in volatility between crude oil prices and six major bilateral exchange rates against the u s dollar in the time frequency space using high frequency intraday data special attention is paid to the potential asymmetries in the causal effects between oil and forex markets the wavelet based granger causality method proposed by olayeni 2016 is applied to quantify the causal relations in the time and frequency domains simultaneously moreover the realized semivariance approach of barndoff nielsen et al 2010 is used to account for possible asymmetries in the transmission of volatility shocks the empirical results show that the significant causal links between oil prices and exchange rates are mainly concentrated in the long run and during periods of increased economic and financial uncertainty such as the global financial crisis and the subsequent european sovereign debt crisis further the causal effects from currency markets to the crude oil market are stronger than in the opposite direction consistent with the forward looking nature of exchange rates the role of the u s dollar as the key invoicing currency for global oil trading and the expanding financialization of the oil market since the mid 2000s in addition significant asymmetries coming from good and bad volatility are found at longer horizons specifically bad volatility seems to dominate good volatility in terms of the importance of transmission of volatility shocks

the extreme value in crude oil and us dollar markets abstract this study constructs a flexible range based volatility model by considering extreme value information to explore the volatility and dependence structures between the oil price and the us dollar exchange rate an asset allocation strategy is implemented to evaluate the economic value and confirm the efficiency of this model the empirical results indicate that the use of extreme value information can not only enhance the explanatory power of volatility structures but also sort out the asymmetric volatility effect in the oil market besides investors can obtain extra benefits of between 72 and 713 annualized basis points by incorporating extreme value information into their asset allocation strategies less risk averse investors can generate higher benefits the empirical results have potentially important implications for asset allocation and risk management

dynamic and directional network connectedness of crude oil and currencies evidence from implied volatility abstract we explore the dynamic and directional network connectedness between implied volatility measures of crude oil and the exchange rate of nine major currency pairs for a sample period from may 2007 to december 2016 we use the dynamic cholesky factor vector autoregression variance decomposition method to ascertain the net directional spillovers and to determine the direction of the transmission of shocks we employed the network graph connectedness method across a few select events characterized by the crude oil price volatility of 2008 09 and 2014 16 we found that the crude oil market has a dominant impact on the total connectedness of the crude oil currency implied volatility relationship suggesting that crude oil affects currencies more than currencies affect crude oil for the time frame of 2007 16 however during the crude oil crisis periods the dynamics are reversed with crude having more of an effect additionally the pairwise directional network connectedness between the currency pairs reveals that eurusd is more sensitive to the crude price fluctuation than other major currency pairs and is one major currency that passes idiosyncratic shocks to other currency pairs

european monetary unification a tour d horizon this article takes stock of the literature and debate over european monetary unification in contrast to other papers where it is argued that the issues and prospects remain shrouded in uncertainty i argue that in a number of important areas a reasonable degree of consensus now exists as the result of a decade of scholarship the subsequent stock taking concentrates on areas where significant questions remain starting with the implications of surrendering the exchange rate and an independent national monetary policy as instruments of adjustment the conduct of fiscal policy under the excessive deficit procedure and the stability pact and how quickly the european union is likely to develop an eu wide system of fiscal federalism to accompany its monetary union turning from fiscal to monetary issues i ask whether the european central bank ecb will be as inflation averse as the bundesbank what exchange rate policy the ecb will pursue and whether the euro will be a leading reserve currency i conclude with what may be the most contentious issue of all namely whether europe s monetary union could collapse after it begins

complementing emu rethinking cohesion policy under emu the less competitive regions of the eu usually assumed to be peripheral have been widely expected to lose ground yet it is the core of the eu that so far has appeared to have suffered from the advent of the euro this paper looks at the processes behind regional divergence in the eu and presents evidence on recent and prospective trends as emu is consolidated bearing in mind that the imminent enlargement of the eu will radically change the political economy of the eu s efforts to assure cohesion policy issues are then discussed looking forward to the next renegotiation of the structural funds it is argued that difficult decisions have to be taken about the extent and character of eu policy the option of an open method of coordination for cohesion policy is put forward as a means of resolving some of the hard choices

forecasting volatility of crude oil markets abstract this article investigates the efficacy of a volatility model for three crude oil markets brent dubai and west texas intermediate wti with regard to its ability to forecast and identify volatility stylized facts in particular volatility persistence or long memory in this context we assess persistence in the volatility of the three crude oil prices using conditional volatility models the cgarch and figarch models are better equipped to capture persistence than are the garch and igarch models the cgarch and figarch models also provide superior performance in out of sample volatility forecasts we conclude that the cgarch and figarch models are useful for modeling and forecasting persistence in the volatility of crude oil prices

the episodic and unpredictable nature of imf lending an empirical analysis having had excess lending capacity at the beginning of 2008 by the end of the year international monetary fund imf lending had increased and in anticipation of a further increase in the demand for fund assistance arguments were being put forward for a substantial increase in imf resources analysis of imf lending over a protracted period of time reveals considerable volatility using both bivariate and multiple regression estimation this paper investigates the determinants of imf lending and examines the extent to which it is predictable although some significant relationships are discovered many of them are unstable and time variant this makes it difficult to predict imf lending with any degree of confidence the paper goes on to examine briefly the policy implications of unpredictability it is critical of the ways in which the problem has been handled in the past and it offers what it argues is a preferable solution

the impact of oil shocks on exchange rates a markov switching approach abstract this paper uses markov switching models to investigate the impact of oil shocks on real exchange rates for a sample of oil exporting and oil importing countries this is an important topic to study because an oil shock can affect a country s terms of trade which can affect its competitiveness we detect significant exchange rate appreciation pressures in oil exporting economies after oil demand shocks we find limited evidence that oil supply shocks affect exchange rates global economic demand shocks affect exchange rates in both oil exporting and importing countries though there is no systematic pattern of appreciating and depreciating real exchange rates the results lend support to the presence of regime switching for the effects of oil shocks on real exchange rates

the nexus between oil price and russia s real exchange rate better paths via unconditional vs conditional analysis abstract instead of analyzing the causality between two time series unconditional analysis as it is usually done the present study deals with the nexus between oil price and russia s real exchange rate conditioning upon potential control variables at well specified horizons and on a frequency by frequency basis this research accounts also for the possible transient linkages and signal discontinuities a major finding of this paper is deeply suggestive of a sharp causality running from oil price to real exchange rate in lower frequencies this implies that russia should better tackle with turbulence triggered by oil price and continue to reduce its energy dependency via drastic and proactive measures the economic and fiscal initiatives of putin administration may help to cope with sudden shocks to lessen the great oil dependence and to build confidence needed for economic recovery while our research does not say much about the routes through which oil price may affect differently real exchange rate it clearly indicates the presence of short term relationship conditional to gdp government expenditures terms of trade and productivity differential the conditional analysis and signal detection appear as meaningful exercises to find new insights into the focal issue

the relationship between energy and equity markets evidence from volatility impulse response functions this paper examines the relationship between the energy and equity markets by estimating volatility impulse response functions from a multivariate bekk model of the goldman sach s energy index and the sp in addition we also calculate the time varying conditional correlations and time varying dynamic hedge ratios from volatility impulse response functions we find that low sp however we find only a weak response from s p 500 volatility to energy price shocks moreover our dynamic hedge ratio analysis suggests that the energy index is generally a poor hedging instrument

global economic activity and crude oil prices a cointegration analysis abstract this paper empirically investigates the cointegrating relationship between crude oil prices and global economic activity the kilian economic index is used as an indicator of global economic activity based on a supply demand framework and the cointegration theory we find that real futures prices of crude oil are cointegrated with the kilian economic index and a trade weighted us dollar index and crude oil prices are influenced significantly by fluctuations in the kilian economic index through both long run equilibrium conditions and short run impacts we also develop an empirically stable data coherent and single equation error correction model ecm which has sensible economic properties empirical results based on the ecm show that the adjustment implied by a permanent change in the kilian economic index is a relatively drawn out process

overturning mundell fiscal policy in a monetary union central to ongoing debates over the desirability of monetary unions is a supposed trade off outlined by mundell 1961 a monetary union reduces transactions costs but renders stabilization policy less effective if shocks across countries are sufficiently correlated then according to this argument delegating monetary policy to a single central bank is not very costly and a monetary union is desirable this paper explores this argument in a setting with both monetary and fiscal policies in an economy with monetary policy alone we confirm the presence of the trade off and find that indeed a monetary union will not be welfare improving if the correlation of national shocks is too low however fiscal interventions by national governments combined with a central bank that has the ability to commit to monetary policy overturn these results in equilibrium such a monetary union will be welfare improving for any correlation of shocks

measuring financial market integration over the long run is there a u shape abstract using long time series for sovereign bond markets of fifteen industrialized economies from 1875 to 2009 i find that financial market integration by the end of the 20th century was higher than in earlier periods and exhibited a j shaped trend with a trough in the 1920s the main reason for the higher financial integration seen today is the recent extensive globalization around the turn of the 20th century countries frequently drifted apart conversely in recent years the bond markets of most countries have moved together both policy variables and the global market environment play a role in explaining the time variation in integration while unexplained changes in the overall level of country risk are also empirically important my methodology based on principal components analysis is immune to outliers and accounts for global and country specific shocks and hence can capture trends in financial integration more accurately than standard techniques such as simple correlations

multifractal cross correlations between the world oil and other financial markets in 2012 2017 abstract statistical and multiscaling characteristics of wti crude oil futures prices expressed in us dollar in relation to the most traded currencies as well as to gold futures and to the e mini s p500 futures prices on 5 min intra day recordings in the period january 2012 december 2017 are studied it is shown that in most of the cases the tails of return distributions of the considered financial instruments follow the inverse cubic power law the only exception is the russian ruble for which the distribution tail is heavier and scales with the exponent close to 2 from the perspective of multiscaling the analysed time series reveal the multifractal organization with the left sided asymmetry of the corresponding singularity spectra even more all the considered financial instruments appear to be multifractally cross correlated with oil especially on the level of medium size fluctuations as the multifractal cross correlation analysis carried out by means of the multifractal cross correlation analysis mfcca and detrended cross correlation coefficient q show the degree of such cross correlations is however varying among the financial instruments the strongest ties to the oil characterize currencies of the oil extracting countries strength of this multifractal coupling appears to depend also on the oil market trend in the analysed time period the level of cross correlations systematically increases during the bear phase on the oil market and it saturates after the trend reversal in 1st half of 2016 the same methodology is also applied to identify possible causal relations between considered observables searching for some related asymmetry in the information flow mediating cross correlations indicates that it was the oil price that led the russian ruble over the time period here considered rather than vice versa

is the experimental auction a dynamic market experimental auctions are generally thought of as static markets this paper presents the results of an experimental auction designed to test whether participants perceptions regarding the relative difficulty of delaying or reversing a transaction outside the experimental market systematically affect their willingness to pay bids the results show that auction participants perceptions significantly impact their bids in a manner that is consistent with real option theory these results suggest that economists must be careful to consider the existence of outside markets when designing experimental auctions

stability without a pact lessons from the european gold standard 1880 1914 stability pacts european lessons from the gold standard the gold standard was a system of fixed exchange rates that offered little opportunity for carrying out monetary policies short of suspending gold convertibility trade integration and capital mobility were very high it is worthwhile asking whether there are useful lessons to draw for emu from european experience during that period one clear lesson is that debts matter another basic finding is that the stability of the european gold standard depended on the underlying price trend deflation prior to 1895 resulted in rising public debt burdens which forced some countries to leave the system once gold was discovered and deflation gave way to inflation real interest service fell debts grew more slowly and a high degree of convergence allowed most countries to return to gold for emu this result implies that stability will hinge on the ecb s policy not being too restrictive other lessons concern the fragility of institutions in the face of deep public finance difficulties the risks for the single market of leaving out countries that have not fully converged and the existence of a virtuous cycle including low real interest rates fast growth and debt reduction marc flandreau jacques le cacheux and frederic zumer

sovereign default and the euro the introduction of the euro meant that countries with sovereign debt problems could not use monetization and devaluation as a way to prevent default the institutional structures of the euro were also widely thought to prevent a country in difficulties being bailed out by other euro members or having its sovereign debt purchased by the european central bank ecb despite these restrictions there was relatively little discussion about sovereign default in pre economic and monetary union debates among economists and financial markets priced in almost no default risk in the pre crisis years the crisis has seen bailouts and bond purchases by the ecb but there has also been a sovereign default inside the euro and further defaults seem likely the introduction of the euro was intended to bring greater stability by ending devaluations triggered by self fulfilling runs on a currency while this particular scenario can no longer happen this paper discusses mechanisms whereby expectations that a country may leave the euro can lead to this outcome occurring copyright 2013 oxford university press

on the intraday dynamics of oil price and exchange rate what can we learn from china and india abstract the main aim of this paper is to investigate the volatility determinants of crude oil and foreign exchange markets and jump spillover between them we consider currencies of two major oil importing countries india and china over the sample period of january 1 2013 to october 31 2019 we find evidence of positive return spillover from the oil to the foreign exchange market however there is a lack of return spillover in the other direction oil jumps appear to have a negative impact on exchange rate conditional volatility and the latter responds asymmetrically to disentangled positive and negative oil price jumps we also report disentangled exchange rate jumps significant impact on conditional oil price volatility these results however are asymmetric based on the nature of jumps and alternative oil price series finally we do not find evidence of co jump between the oil and foreign exchange markets these results have important implications for investors and policymakers

nonlinear causality between crude oil price and exchange rate a comparative study of china and india while several studies have examined the linear causal relationship between oil prices and exchange rates little is known about the nonlinear causality between these two variables the present paper tries to fill this research gap in the context of india and china by applying the hiemstra and jones 1994 nonlinear granger causality test to the var residuals the study finds a significant bi directional nonlinear granger causality between oil prices and exchange rates in both countries the findings suggest that the nonlinearity of oil price influences the exchange rate irrespective of the exchange rate regimes further to check robustness the persistence in the variance of oil price and exchange rate is taken into account using a garch 1 1 model while the results consistently hold in the case of india with respect to china a unidirectional causality runs from exchange rate to oil price however the oil price in china does not granger cause exchange rate

viewpoint understanding the great depression bernanke 2000 and james 2001 it is now commonplace to view the depression from an international perspective and to test causal hypotheses by comparing the experiences of countries that endured more and less severe cyclical downturns this is in contrast with the earlier generation of scholarship notably the influential work of friedman and schwartz 1963 and temin 1976 which viewed the depression as centred in the united states and focused on shocks and policies in that country specific hypotheses associated with the global perspective continue to be disputed but there seems little question that the international view serves as a point of departure for a growing portion of recent scholarship whether this new research has produced a scholarly consensus is another matter in this paper i ask whether it is possible to arrive at such a consensus by synthesizing the old and new literatures i describe a perspective that views the great depression as a global phenomenon emphasizing linkages among countries and the destabilizing influence of the international monetary and financial system but that at the same time acknowledges the uniquely important character of events and policies in the united states i thereby suggest that the opposition between the old and new or u s centric and global views of the great depression may ultimately prove artificial the task for macroeconomic and historical scholarship

dominant currencies special drawing rights and supernational bank money tem ims the crisis was preceded by a bubble in the housing and share markets fuelled by an expansive monetary policy see fratianni 2008 by now a consensus has developed that the financial regulatory structure needs a significant overhaul much less attention has been paid to the instability of the dollar based ims and the potential that it may have to spark another deep crisis in the future the fact that the financial tsunami has not instigated a confidence crisis in the us dollar has fed optimism that the financial crisis may be resolved without substantive changes in the existing international monetary regime in this vein at the onset of the crisis bernanke 2007 reaffirmed the thesis that the external imbal ances of the us were largely caused by factors taking place outside the us namely in fast growing emerging economies in particular china and oil producing countries where ex ante saving was far in excess of ex ante investment the implication of the global saving glut thesis is that the large us external imbalances are largely a temporary phenomenon rather than structural and thus would find a natural solution in time another pietro alessandrini is professor of monetary economics at the faculty of economics of the university of ancona italy and a member of mofir money and finance research group michele fratianni is professor emeritus at the kelley school of business of indiana university professor of international finance at the faculty of economics of the university of ancona italy and a member of mofir money and finance research group

oil prices exchange rates and emerging stock markets abstract while two different streams of literature exist investigating 1 the relationship between oil prices and emerging market stock prices and 2 the relationship between oil prices and exchange rates relatively little is known about the dynamic relationship between oil prices exchange rates and emerging market stock prices this paper proposes and estimates a structural vector autoregression model to investigate the dynamic relationship between these variables impulse responses are calculated in two ways standard and the recently developed projection based methods the model supports stylized facts in particular positive shocks to oil prices tend to depress emerging market stock prices and us dollar exchange rates in the short run the model also captures stylized facts regarding movements in oil prices a positive oil production shock lowers oil prices while a positive shock to real economic activity increases oil prices there is also evidence that increases in emerging market stock prices increase oil prices

downside risk and the energy hedger s horizon abstract in this paper we explore the impact of investor time horizon on an optimal downside hedged energy portfolio the optimal heating oil hedge ratio is first calculated for a variety of downside risk objective functions at different time horizons using the wavelet transform next associated hedging effectiveness is contrasted for a range of risk metrics with all metrics showing increasing hedging effectiveness at longer horizons moreover decreased hedging effectiveness is demonstrated for increased levels of uncertainty at higher confidence intervals while small differences in effectiveness are found across the different hedging objectives time horizon effects are found to dominate confirming the importance of the hedging horizon the findings suggest that while downside risk measures are useful in determining an optimal futures hedge encompassing negative returns hedging horizon and confidence intervals should also be given careful consideration by the energy hedger

effect of inventory announcements on crude oil price volatility abstract this paper examines the behavior of crude oil futures price volatility and investigates how the eia weekly crude oil inventory reports announcements especially information shocks impact crude oil price movement and volatility this study focuses on inventory information shocks using a new measure rather than on inventory changes themselves the empirical results reveal that inventory information shocks rather than actual inventory changes negatively affect crude oil returns on the day the eia releases the inventory information although inventory shocks have no effect on daily conditional variance which mainly follows a garch 1 1 process to test the robustness of our model we re estimate the models for three subsamples according to all results we find that the effect of inventory shocks is weakened in rapid growth periods and disappears in steep fall markets

winners and losers from the uro abstract using the synthetic control method this paper estimates the effect of having joined the monetary union on the income per capita of six early adopters of the euro our estimates suggest that while the income per capita of belgium france germany and italy would have been higher without the euro that of ireland would have been considerably lower in contrast the netherlands would have been as well off without the euro we show that these estimates are not contingent on our choice of baseline control groups growth predictors and pre treatment period in addition we use the insights from the literature on the economic determinants of the costs and benefits of monetary unions to explain our estimates we find that early euro adopters with a business cycle more synchronized to that of the union and more open to intra union trade or migration lost less or gained more from the euro a key role in increasing post euro income losses of union members has been played by the integration of capital markets

a calibrated auction conjoint valuation method valuing pork and eggs produced under differing animal welfare conditions this paper develops a valuation method which generates consistent and systematic estimates of people s preferences for complex multi attribute goods by inextricably linking auction bids with conjoint ratings the advantage of the valuation approach is that it permits the estimation of people s values for many potential goods allows one to decompose people s values for a good into its sub components and permits the study of preference heterogeneity without distributional assumptions we apply the method to an important and increasingly controversial topic animal welfare the method is used to determine people s preferences for eggs and pork produced from different production systems data from experiments conducted in three diverse u s locations chicago il dallas tx and wilmington nc indicates that people are on average willing to pay 0 95 more for a dozen eggs raised in an aviary pasture system vs a cage system and are willing to pay 2 02 more for two pounds of pork chops raised in a pasture system as opposed to a crate system

dynamic link between oil prices and exchange rates a non linear approach abstract we explore the non linear relationship between crude oil prices and exchange rates of major currencies from quantitative and structural perspectives by utilizing bivariate normal mixture model the correlation coefficients between oil prices and exchange rates demonstrate that their dependences typically start from 2004 then dynamically change over time then we investigate whether business cycle and oil price shocks as two possible exogenous factors affect the dependence structure of oil fx linkage we find significant structural heterogeneity during economic expansion while little evidence of heterogeneity in recession this finding provides alternative interpretations for the enhanced dependence between oil prices and exchange rates and generates implications of financialization in commodity market in terms of oil price shocks kilian 2009 the normal mixture model captures significant heterogeneity implying that unstable oil fx dependence structure is frequently associated with oil aggregate demand shocks and oil specific demand shocks with an emphasis on the dynamic weights of two underlying states we interestingly find that structural heterogeneities coincide with a variety of geopolitical and economic events the application of normal mixture not only provide us knowledge of non linear relationship between oil prices and exchange rates but also guidance for investors in risk management and portfolio diversification complementary to the traditional portfolio theory based on normal distribution

sovereign risk premiums in the european government bond market this paper provides a study of bond yield differentials among eu government bonds issued between 1993 and 2005 on the basis of a unique dataset of issue spreads in the us and dm euro bond market interest differentials between bonds issued by eu countries and germany or the usa contain risk premiums which increase with fiscal imbalances and depend negatively on the issuer s relative bond market size the start of the european monetary union has shifted market attention to debt service payments as the key measure of indebtedness and eliminated liquidity premiums in the euro area

gold monetization and gold discipline gold and its price have emerged as frequent topics of both academic and government debate 2 public attention focused on the gold market since gold s price began fluctuating violently in 1980 and 1981 has turned to gold as a possible means of removing some discretion inherent in the current fiat money system since lack of adherence to monetary rules can lead to problems of dynamic policy inconsistency academic economists have begun seriously to reconsider monetary standards based either on gold or on some other commodity as politically feasible methods of establishing rules 3

interaction between oil and us dollar exchange rate nonlinear causality time varying influence and structural breaks in volatility abstractthis article examines the nonlinear granger causality and time varying influence between crude oil prices and the us dollar usd exchange rate using the hiemstra and jones hp test the diks and panchenko dp test and the time varying parameter structural vector autoregression model by applying the iterated cumulative sums of squares icss algorithm and the dcc garch model the effects of structural breaks in volatility of the two markets are also investigated the empirical analysis indicates that first crude oil prices are the nonlinear granger cause of the usd exchange rate but not vice versa second the usd exchange rate exerts a stronger and more stable negative influence on crude oil prices in the short term and the influence gradually weakens after 2012 finally ignoring structural breaks can increase the negative volatility correlation between the oil and usd exchange rate markets which is particularly remarkable during the financial crisis

oil and us dollar exchange rate dependence a detrended cross correlation approach abstract this paper examines the relationship between oil prices and the us dollar exchange rate using detrended cross correlation analysis for a wide set of currencies in the periods before and since the onset of the recent global financial crisis we characterized the oil price exchange rate relationship at different time scales and documented two main findings first the cross correlation analysis indicated that oil price exchange rate correlations were negative and low having in general lower values for longer time scales second negative dependence between oil and the us dollar increased after the onset of the global financial crisis for all time scales thereby providing evidence of both contagion and interdependence this empirical evidence has important implications for monetary and fiscal policies asset management and risk assessment

special drawing rights from a situation as late as 2008 when they were largely unfashionable special drawing rights sdr s have become the centre of attention in discussions about a reformed international monetary system the g20 and the international monetary fund imf have backed a significant additional allocation of sdrs and china and the united nations have suggested that this should be followed up with more substantial reforms that diminish the role of the dollar and enhance that of the sdr these proposals would incorporate a substitution account that allows holders of dollars to swap them into sdr s but they see this as only one step towards establishing an sdr based system this article assesses the issues involved and the contemporary political economy of such proposals placing them in historical context it contemplates the likely evolution of the international monetary system and examines the extent to which the sdr is likely to come back fully into fashion

exchange rate economics is always and everywhere controversial abstractthis article reviews the major developments in the recent literature on exchange rate economics it is argued that the link between the exchange rate and economic fundamentals is breaking new ground evidence indicates that alternative analytical frameworks such as the new open economy macroeconomics and exchange rate arrangements such as the euro have their theoretical and analytical elegance but are proving empirically very difficult to implement the role of methodological advances and alternative fundamental instruments such as world commodity prices is also highlighted

the six flaws of the eurozone when it was created it was reasonable to think that the architecture of the monetary union was not perfect it was also likely that the imperfections would lead to difficulties possibly even crises this article identifies six flaws most of which had been identified even before the launch of the euro it starts by pinpointing why the eurozone a bold and unprecedented experiment is inherently fragile it is not conducive to the convergence of national inflation rates it is not an optimum currency area and it is not a federal state taking these characteristics as given the article argues that the eurozone needs to address their implications it observes that it has not been the case so far hence the six flaws fiscal discipline has not been achieved the need for a banking union which has finally been recognized and only partly implemented the ecb is not a complete and fully independent central bank some member countries need a sovereign debt relief structural reforms are badly needed but intrusiveness cannot be the solution the governance of the eurozone is not designed for crisis management

the becker degroot marschak mechanism is not necessarily incentive compatible even for non random goods abstract this paper uses results from karni e safra z 1987 preference reversals and the observability of preferences by experimental methods econometrica 55 675 685 and karni e 1989 generalized expected utility analysis of multivariate risk aversion international economic review 30 297 305 to show that the becker degroot marschak mechanism is not always incentive compatible even when the item to be valued involves no uncertainty contrary to several recent assertions

contingent deficit sanctions and moral hazard with a stability pact abstract we show how a stability pact based on deficit sanctions eliminates the exacerbation of debt accumulation that may arise from monetary unification moreover with sanctions contingent on the observed state of the economy the pact avoids aggravating the situation of a country in recession moral hazard problems arise if the state also depends on unobservable politically costly fiscal effort this could explain why sanctions under the actual stability and growth pact are only automatically waived in extreme recessions and why the procedure linking observed deficits and sanctions involves a long and detailed assessment of a country s situation

forecasting pre world war i inflation the fisher effect and the gold standard we examine interest and inflation rates from 1879 to 1913 deflation prior to 1896 was followed by inflation average u s inflation was 3 1 percentage points higher in the years after 1896 yet nominal interest rates were no higher after 1896 this nonadjustment of nominal rates would be consistent with rational expectations if inflation was not forecastable and indeed univariate tests show little sign of serial correlation but gold production does forecast inflation the relationship between mining and inflation was such that expected inflation should have risen 300 basis points between 1890 and 1910 we consider explanations of this failure to foresee the shift in inflation after 1896 and conclude that it is not persuasive evidence that investors ignored relevant information but does suggest great uncertainty about the appropriate model for analyzing the economy

the empirical relationship between energy futures prices and exchange rates abstract this paper investigates the interaction between energy futures prices and exchange rates results are presented to show that futures prices for crude oil heating oil and unleaded gasoline are co integrated with a trade weighted index of exchange rates this is important because it means that there exists a long run equilibrium relationship between these four variables granger causality results for both the long and short run are presented evidence is also presented that suggests exchange rates transmit exogenous shocks to energy futures prices

the political economy of the european economic and monetary union political sources of an economic liability emu would be an economic liability a single currency would cause at most small trade and investment gains but would raise average cyclical unemployment and possibly raise inflation perpetuate structural unemployment and increase the risk of protectionism emu is nevertheless being pursued in order to create a political union fundamental disagreements among member states about economic policies foreign and military policies and the sharing of political power are likely to create future intra european conflicts a united europe would be a formidable participant in the twenty first century s global balance of power with uncertain consequences for world stability and peace

volatility spillovers for energy prices a diagonal bekk approach abstract we examine the relationship between return and volatility as well as the covolatility spillover for energy foreign currency and stock markets using the diagonal bekk model using daily crude oil natural gas and the coal prices as proxies for energy prices the s p500 index as a proxy for the u s stock market and the eur usd exchange rate as a proxy for the exchange rate we find robust evidence for the volatility spillover effects among the three markets also in the 16 out of 20 pairwise relationships in the five markets there are significant negative covolatility spillover effects in the four pairs involving coal there are positive and significant covolatility spillover effects we conclude that the energy markets and the stock market have stronger covolatility spillovers than others

is food and drug administration policy governing artisan cheese consistent with consumers preferences abstract united states government policy prohibits the sale of cheese made from unpasteurized milk aged less than 60 days despite contested science behind the policy we use experimental auctions for artisan cheese to estimate the value of pasteurization and age as food safety attributes which is the rationale for the policy we also look at consumers perception of the tradeoff between safety and quality a survey was conducted with participants at farmers markets including experimental auctions and sensory analysis of pasteurized and unpasteurized cheese and questions concerning attitudes about food safety there is no evidence of positive demand for pasteurization and there is no evidence of a tradeoff between safety and quality on average artisan cheese consumers make purchasing decisions based on taste not their attitude toward food safety the results of this study raise questions about the possible extension of a minimum aging period for cheese made from unpasteurized milk

price relationships in the petroleum market an analysis of crude oil and refined product prices in this paper the relationships between crude oil and refined product prices are investigated in a multivariate framework this allows us to test several partly competing assumptions of earlier studies in particular we find that the crude oil price is weakly exogenous and that the spread is constant in some but not all relationships moreover the multivariate analysis shows that the link between crude oil prices and several refined product prices implies market integration for these refined products this is an example of supply driven market integration and producers will change the output mix in response to price changes

the european sovereign debt crisis the origin and propagation of the european sovereign debt crisis can be attributed to the flawed original design of the euro in particular there was an incomplete understanding of the fragility of a monetary union under crisis conditions especially in the absence of banking union and other european level buffer mechanisms moreover the inherent messiness involved in proposing and implementing incremental multicountry crisis management responses on the fly has been an important destabilizing factor throughout the crisis after diagnosing the situation we consider reforms that might improve the resilience of the euro area to future fiscal shocks

demand for farm animal welfare and producer implications results from a field experiment in michigan abstract this study utilizes a becker degroot marschak bdm mechanism to assess michigan consumer demand for animal welfare practices results are examined in the context of changing farm production costs and producer marketing margins we find that while consumers are willing to pay significant premiums for animal welfare standards failing to account for the costs associated with producing the entire animal under the new system could lead to suboptimal policy that negatively affects producer welfare our results suggest that consumer premiums for animal welfare are product specific and that wtp estimates should not be generalized to the entire animal we discuss policy implications of our findings and highlight the importance of considering producer costs when evaluating consumer demand for farm animal welfare practices

a new world order explaining the international diffusion of the gold standard 1870 1913 abstract the gold standard gradually became an international monetary regime after 1870 similarly some nations in the european union are waiting to adopt the euro while others have joined immediately what explains the timing of exchange rate regime adoption to find out the international diffusion of the gold standard is analyzed duration analysis shows that network externalities operating through trade channels the desire to decrease borrowing costs on international capital markets and the level of development matter some evidence shows that the level of exchange rate volatility or inflationist agricultural interests did not matter for the timing of adoption

the political economy under monetary union has the euro made a difference economic and monetary union emu has transformed europe and has created an integrated pan european economy much research has focused on understanding this integration process and what benefits and costs it entails this paper identifies a political economy channel of emu as the monetary union implies that member states had to transfer or at least curtail their policy autonomy in several areas such as monetary policy and fiscal policy the paper shows that emu has helped reduce the impact of political shocks on the domestic economy of member states but magnified the transmission of political shocks within the euro area equally importantly economies with weak domestic policies and institutions exhibited a significantly higher sensitivity to domestic political shocks before emu but not thereafter while this may entail that emu has brought benefits to countries with weaker policies and institutions by insulating them from adverse political developments at home a potential drawback is that it may provide weaker market discipline for domestic political stability marcel fratzscher and livio stracca

oil prices and exchange rates the quotations show a sharply divergent pattern in the response of the foreign exchange market to announcements of oil price increases during the first oil shock news about oil price rises led to a strengthening of the dollar whereas during the i979 surge of oil prices the reverse was generally true when the news was not so bad as feared the dollar fell back in i974 but rose in i979 in 1980 the pattern shifted once again back to dollar appreciation is there a rational fundamental explanation for the behaviour of the foreign exchange market or is it a matter of traders responding to what other traders arbitrarily think it is difficult to resolve this question but some insight can be provided through an analytical examination of the relationship between oil price increases and exchange rates the paper begins with a theoretical framework for analysing the relation between oil prices and exchange rates and then uses the theory to explain the behaviour of the foreign exchange market

sovereign risk credibility and the gold standard 1870 1913 versus 1925 31 author s obstfeld maurice taylor alan m abstract what determines sovereign risk we study the london bond market from the 1870s to the 1930s our findings support conventional wisdom concerning the low credibility of the interwar gold standard before 1914 gold standard adherence effectively signalled credibility and shaved up to 30 basis points from country borrowing spreads in the 1920s however simply resuming prewar gold parities was insufficient to secure benefits countries that devalued before resumption were treated more favorably and markets scrutinized other signals public debt and british empire membership were important determinants of spreads after world war one but not before

relationship between oil price and exchange rate by fda and copula this article investigates the relationship between daily crude oil prices and exchange rates functional data analysis is used to show the clustering pattern of exchange rates and oil prices over the time period through high dimensional visualizations we select exchange rates for important currencies related to crude oil prices by using the objective bayesian variable selection method the selected sample data exhibits non normal distribution with fat tails and skewness under the non normality of the return series we use copula functions that do not require to assume the bivariate normality to consider marginal distribution in particular our study applies the popular and powerful statistical methods such as gaussian copula partial correlations and gaussian copula marginal regression we find evidence of significant dependence for all considered pairs except for the mexican peso brent our empirical results also show that the rise in the west texas intermediate wti oil price returns is asso

tradable deficit permits efficient implementation of the stability pact in the european monetary union tradable deficit permits efficient implementation of the stability pact borrowing from the experience of environmental markets this paper proposes a system of tradable deficit permits as an efficient mechanism for implementing fiscal constraints in the european monetary union having chosen an aggregate target for the union and an initial distribution of permits emu countries could be allowed to trade rights to deficit creation the scheme exploits countries incentives to minimize their costs is transparent and flexible in accommodating idiosyncratic shocks and allows for adjustments in case of europe wide recessions in addition it need not treat all countries identically and can be designed to penalize countries with higher debt to gdp ratios finally the scheme rewards countries for reducing their deficit below the initial allowance lending credibility to the stability pact s goal of a balanced budget in the medium run alessandra casella

the relationship between crude oil spot and futures prices cointegration linear and nonlinear causality the present study investigates the linear and nonlinear causal linkages between daily spot and futures prices for maturities of one two three and four months of west texas intermediate wti crude oil the data cover two periods october 1991 october 1999 and november 1999 october 2007 with the latter being significantly more turbulent apart from the conventional linear granger test we apply a new nonparametric test for nonlinear causality by diks and panchenko after controlling for cointegration in addition to the traditional pairwise analysis we test for causality while correcting for the effects of the other variables to check if any of the observed causality is strictly nonlinear in nature we also examine the nonlinear causal relationships of vecm filtered residuals finally we investigate the hypothesis of nonlinear non causality after controlling for conditional heteroskedasticity in the data using a garch bekk model whilst the linear causal relationships disappear after vecm cointegration filtering nonlinear causal linkages in some cases persist even after garch filtering in both periods this indicates that spot and futures returns may exhibit asymmetric garch effects and or statistically significant higher order conditional moments moreover the results imply that if nonlinear effects are accounted for neither market leads or lags the other consistently videlicet the pattern of leads and lags changes over time

the influence of the international oil prices on the real effective exchange rate in romania in a wavelet transform framework article i nfo the purpose of this paper is to assess the empirical influence of oil prices on the real effective exchange rate in romania in a wavelet transform framework more precisely we investigate to what extent oil prices impact the real effective exchange rate in an eastern european transition country characterised by a low level of retail fuel prices and by an important growth rate of these prices as compared to the other eu countries for this purpose we use a discrete wavelet transform approach and scale by scale granger causality tests we find that oil prices have a strong influence on the real effective exchange rate in the short run but also for large time horizons these results are important considering the fact that in a classical granger causality linear framework for the entire sample we find that oil prices have no influence on the real effective exchange rate the findings remainrobust whenresampling the initial 1986 2009period orwhen weuse analternative continuous wavelet transform in addition we discover that mainly the positive shocks associated with an increase in oil prices have an impact upon the real effective exchange rate movements in the short and long runs

dynamic spillover between commodities and commodity currencies during united states q e abstract this paper comprehensively discusses the dynamic relationship between commodities and commodity currencies particularly during the u s quantitative easing qes by integrating the generalized spillover index into a fractionally integrated var fivar model our empirical analyses reach the following conclusions first the static return and volatility spillovers analyses show that the food is the only net receiver among all the commodity price indices second the dynamic total return and volatility spillover accelerated growth in term of the index by roughly between 15 and 25 for four regional groups during the initiation of the qe1 and subsequently remained across the first two rounds of the u s qe nevertheless both the total return and volatility spillover declined in the midst of the qe3 as the u s federal reserve signaled the qe tapering due to the anticipated u s economic recovery third the energy and metals components were the largest net transmitters of return and volatility spillovers during the u s qes a possible interpretation is that demand for energy and metals increase associated with an increase in economic activity that is triggered by the u s qes last almost all the sample commodity currencies acted as net receivers of return and volatility spillovers during the u s qes supporting the pass through of commodities to commodity currencies

is the proposed east african monetary union an optimal currency area a structural vector autoregression analysis summary this paper empirically assesses the suitability of the east african ea countries for a regional monetary union by testing for symmetry of the underlying structural shocks the results indicate that supply and demand shocks are generally asymmetric which does not lend strong support for forming a currency union in the ea region at the moment however the speed and magnitude of adjustment to shocks is similar across the countries therefore further integration of the economies might lead to more favorable conditions for a monetary union although evidence in favor of linking an ea currency to an external anchor is weak such support seems to favor the euro

cross of euros the eurozone currently confronts severe short run macroeconomic adjustment problems and a deficient institutional architecture that has to be reformed in the longer run europe s efforts at economic and monetary union are historically unprecedented however the gold standard provides lessons regarding what will and won t work macroeconomically and politically in the short run while us history provides long run lessons regarding appropriate institutional structures the latter also suggests that institutional reform only happens at times of great crisis and that it cannot be taken for granted the eurozone s leaders may therefore ultimately have to take heed of the lessons of history regarding currency union breakups