general equilibrium modelling of the direct and indirect economic impacts of water quality improvements in the netherlands at national and river basin scale abstract the main objective of the study presented in this paper is to estimate the direct and indirect economic impacts of water quality policy scenarios in the netherlands focusing on the reduction of emission levels of nutrients and a number of eco toxicological substances for this purpose an applied general equilibrium age model consisting of 27 production sectors is extended to water through the inclusion of substitution elasticities between labour capital and emissions to water in the sectors production functions the macro economic costs of a 10 20 and 50 reduction of the emission levels in the year 2000 of ten priority substances in the eu water framework directive vary between 0 2 and 9 4 of net national income nni a large share of the total economic costs are borne by important sources of pollution like commercial shipping the chemical and metal industry however important spin off effects due to adaptation take place in the tertiary service sector besides the estimation of the economy wide impacts of water quality improvements the novelty of the study presented here is found in the downscaling of national and sector results to river basin level and the estimation of shadow prices for water polluting substances through the introduction of an emission permits market

effects of speculation and interest rates in a carry trade model of commodity prices abstract the paper presents and estimates a model of the prices of oil and other storable commodities a model that can be characterized as reflecting the carry trade it focuses on speculative factors here defined as the trade off between interest rates on the one hand and market participants expectations of future price changes on the other hand it goes beyond past research by bringing to bear new data sources survey data to measure expectations of future changes in commodity prices and options data to measure perceptions of risk some evidence is found of a negative effect of interest rates on the demand for inventories and thereby on commodity prices and positive effects of expected future price gains on inventory demand and thereby on today s commodity prices

nonrenewable resource scarcity nonrenewable resource theory often is summarized by hotelling s rule this paper reviews theoretical extensions and empirical investigations of resource extraction models observed data are often inconsistent with the hotelling rule suggesting that other characteristics of nonrenewable resource supply including exploration heterogeneous ore quality technological progress and capital investment are important determinants of the dynamic behavior of resource prices given the persistent recurrence of concern about nonrenewable resource scarcity measures of nonrenewable resource scarcity and the empirical evidence for the time trends of those measures are reviewed finally the implications of nonrenewable resource scarcity for economic growth are examined

a review of the water energy nexus abstract water and electricity are fundamentally linked at a basic level electricity generation requires water and water treatment and transportation use electricity historically there has been little reason to understand the nature of these links due largely to the presumption that water was not a threat to energy security nor electricity a threat to water security this presumption is now being challenged industry reforms increasing demand and more recently climate change are bringing into sharp focus the links between water and electricity in unprecedented ways general awareness of the links between water and electricity is increasing daily as the ramifications of the links are being felt the world over society s ability to deal with the challenges and uncertainties arising from the links between water and electricity is being hindered by limited understanding of the nature of the links and seeming lack of policy tools to effectively analyze them this paper reviews comprehensively the links between water and electricity presents a classification system for identifying links using the classification system this study further discusses these links by drawing upon examples from literature and follows with a synopsis of the nature of these links with this background the paper reviews and compares water energy studies in terms of scope objectives methodologies and key findings discusses major limitations of these studies and identifies important areas that would benefit from more in depth research this research contends that this type of approach is unsuitable in the longer term particularly when examining complex and multidimensional issues like the water energy nexus this work suggests that the nature of the nexus should and can be explored from a wider perspective by developing a suitable integrated methodological framework to serve as a platform for such exploration the purpose of this paper therefore is to outline the development of such a framework introduces integral theory and discusses how integral theory has shaped the development of the methodological framework employed in this research presents the framework and describes the suite of methods

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

fiscal policy with agents differing in altruism and ability this paper presents an overlapping generations model of growth with individuals differing in productivity and altruism within such a model wealth is entirely held in the steady state by the families with the highest degree of altruism we then look at the macroeconomic and distributive effects of three fiscal policies public debt pay as you go social security and estate taxation under plausible assumption we show that both public debt and social security are neutral a la ricardo but increase inequality we also show that a estate taxation can be pareto worsening even though it can foster income equality

economywide impacts of climate change on agriculture in sub saharan africa two possible adaptation scenarios to climate change for sub saharan africa are analyzed under the sres b2 scenario the first scenario doubles the irrigated area in sub saharan africa by 2050 compared to the baseline but keeps total crop area constant the second scenario increases both rainfed and irrigated crop yields by 25 for all sub saharan african countries the two adaptation scenarios are analyzed with impact a partial equilibrium agricultural sector model combined with a water simulation module and with gtap w a general equilibrium model including water resources the methodology combines the advantages of a partial equilibrium approach which considers detailed water agriculture linkages with a general equilibrium approach which takes into account linkages between agriculture and nonagricultural sectors and includes a full treatment of factor markets the efficacy of the two scenarios as adaptation measures to cope with climate change is discussed due to the limited initial irrigated area in the region an increase in agricultural productivity achieves better outcomes than an expansion of irrigated area even though sub saharan africa is not a key contributor to global food production rainfed irrigated or total both scenarios help lower world food prices stimulating national and international food markets

approximating infinite horizon models in a complementarity format a primer in dynamic general equilibrium analysis abstract we demonstrate the advantages of the complementarity formulation for approximating infinite horizon equilibria in neoclassical growth models as compared with techniques originally developed for optimal planning models the complementarity approach does not require an ex ante specification of the growth rate in the terminal period and is therefore suitable for models with endogenous growth or short time horizons we also consider approximation issues in models with multiple infinitely lived agents changes in net indebtedness over a finite period are estimated as part of the model to obtain a precise approximation of the infinite horizon equilibria with a small number of time periods

tax perceptions and preferences over tax structure in the united kingdom do voters know their tax liabilities accurately or do they systematically misperceive them could such misperceptions influence voters choices over alternative tax structures proposed by politicians this paper assesses the accuracy of individuals tax perceptions in the uk using micro data from the british social attitudes survey 1995 and tests an empirical model of the determinants of tax structure preferences including tax misperceptions a systematic bias towards over estimation of income and expenditure tax vat liabilities is found and individ uals tax preferences appear to be both dominated by self interest and distorted by tax misperceptions whether using a traditional utility maximisation framework or a variety of public choice frameworks economists agree that consumer voters or taxpayer voters dislike taxes taxes lower the consumption possibility set and thereby utility politicians proposing higher taxes expect to lose votes unless they can persuade voters that the utility gain from the use of those taxes will exceed the tax induced utility loss of course the extent of individuals losses will depend on their circumstances and how revenues are raised the tax structure traditional tax incidence and excess burden analyses and models of political costs associated with the tax structure hettich and winer 1984 1988 each provide guidance on the extent to which different individuals may be expected to suffer and vote differently under alternative tax structures much will depend on attitudes towards and perceptions of specific taxes especially personal income taxes and consumption taxes underlying most such analyses are two common presumptions i tax preferences are dictated by self interest and ii individuals accurately assess their tax liabilities and so make informed choices two largely independent areas of literature have challenged these assumptions first models incorporating altruism

altruism and risk sharing in networks we provide the first analysis of the risk sharing implications of altruism networks agents are embedded in a fixed network and care about each other we study whether altruistic transfers help smooth consumption and how this depends on the shape of the network we identify two benchmarks where altruism networks generate efficient insurance for any shock when the network of perfect altruism is strongly connected and for any small shock when the network of transfers is weakly connected we show that the extent of informal insurance depends on the average path length of the altruism network and that small shocks are partially insured by endogenous risk sharing communities we uncover complex structural effects under iid incomes central agents tend to be better insured the consumption correlation between two agents is positive and tends to decrease with network distance and a new link can decrease or increase the consumption variance of indirect neighbors overall we show that altruism in networks has a first order impact on risk and generates specific patterns of consumption smoothing

are green hopes too rosy employment and welfare impacts of renewable energy promotion in view of pressing unemployment problems policy makers across all parties jump on the prospects of renewable energy promotion as a job creation engine which can boost economic well being our analytical model shows that initial labor market rigidities in theory provide some scope for such a double dividend however the practical outcome of renewable energy promotion might be sobering our computable general equilibrium analysis of subsidized electricity production from renewable energy sources res e in germany suggests that the prospects for employment and welfare gains are quite limited and hinge crucially on the level of the subsidy rate and the financing mechanism if res e subsidies are financed by labor taxes welfare and employment effects are strictly negative for a broad range of subsidy rates the use of an electricity tax to fund res e subsidies generates minor benefits for small subsidy rates but these benefits quickly turn into significant losses as the subsidy rate exceeds some threshold value

looking for evidence of speculative stockholding in commodity markets abstract the theory of commodity price with speculative storage predicts that prices are a two regime process depending on whether or not inventories are held the price process is nonlinear in that it is nondifferentiable at some p which separates the data into a history independent regime and an autoregressive process this paper looks for evidence of nonlinearity in the price data and tests the theory in the context of threshold autoregressive models under the assumption that shocks to harvest are i i d while we find evidence for regime specific behavior we also find the degree of persistence in the stockout regime to be much stronger than that predicted by theory

storage slow transport and the law of one price theory with evidence from nineteenth century u s corn markets abstract this paper argues that localized price spikes should be a regular feature of competitive commodity markets it develops a rational expectations model of physical arbitrage in which trade takes time and shows that inventory management plays a crucial role in the way regional prices are determined in equilibrium arbitrageurs choose export quantities to ensure inventories in the importing center regularly fall to 0 they earn enough profits from high prices on these occasions to offset small losses at other times an analysis of detailed data from chicago and new york corn markets provides empirical support for the model

commodity storage and the market effects of biofuel policies the author 2016 legislation passed in 2007 by the u s congress increased by about 1 3 billion bushels the net amount of corn required to be processed annually into ethanol for motor fuel use we estimate that corn prices were about 30 higher from 2006 to 2014 than they would have been without this demand increase we develop a partially identified structural vector autoregression model our identification strategy is unique in the literature because it enables us to estimate the effects of transitory shocks such as weather separately from the effects of persistent shocks such as the increased ethanol mandate moreover by only partially identifying our model we show how to generate robust conclusions without strong identifying assumptions

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

coupling national and global models to explore policy impacts of ndcs abstract since the official submission of the national determined contributions ndcs under the paris agreement framework a set of studies attempted to assess the energy and economic impacts on ndcs by using large scale energy economy models both at the national and global level this paper presents a novel approach to quantify policy impacts of ndcs by combining a set of technology rich country level models for major economies with an economy wide global cge model the methodology enhances the credibility of global model based scenarios by complementing it with detailed representation of country level policy priorities and structural heterogeneities captured by national level models it also improves the consistency between national short to medium term policy plans with global long term climate objectives results indicate that energy efficiency improvements and increased penetration of res are the main contributors to emission reduction induced by ndcs the role of emission reduction options differentiates by country depending on national socio economic objectives energy resource endowment and climate policy ambition the paris pledges are found to be consistent with robust economic growth both in developed and in emerging economies ndcs result in a more labour intensive economy driven by res expansion while major clean energy manufacturers eu china have the potential to improve their balance of trade

an introduction to the wage curve en conomists and policymakers are interested in understanding the forces that determine the level of unemployment and the level of wages this paper describes an empirical discovery made with the help of international microeconometric evidence covering more than a dozen nations about a link between these two variables the connection can be portrayed on a graph with the level of unemployment on the horizontal axis and the level of wages on the vertical axis then the wage curve as shown in figure 1 is a downwardsloping locus this relationship tells us that holding others things constant if a region has a rise in unemployment in a particular year those who live there will have a fall in their wages in that year what does this curve mean how in a field where fully controlled experiments are almost impossible could there be any convincing scientific basis for this wage curve what is the relationship between the wage curve and a phillips curve other than that the curve of figure 1 looks like a phillips curve with the vertical axis mislabeled how does the wage curve fit into existing economic knowledge and is the empirical finding consistent with competitive theory this paper sketches answers to these kinds of questions the discussion draws on our book the wage curve blanchflower and oswald 1994 where the points raised here are investigated more fully it also rests upon work done by other economists whose work is listed in the paper and the bibliography

bridging dsge models and the raw data abstract a method to estimate dsge models using the raw data is proposed the approach links the observables to the model counterparts via a flexible specification which does not require the model based component to be located solely at business cycle frequencies allows the non model based component to take various time series patterns and permits certain types of model misspecification applying standard data transformations induces biases in structural estimates and distortions in the policy conclusions the proposed approach recovers important model based features in selected experimental designs two widely discussed issues are used to illustrate its practical use

fiscal policy in a growth model with both altruistic and nonaltruistic agents this paper examines the long run behavior of an overlapping generations model with a population consisting of altruistic and nonaltruistic agents it also studies the effect of fiscal policy on aggregate capital accumulation and on the welfare of both types of agents it shows that an increase in the relative number of nonaltruists is pareto improving in the steady state it also shows that the introduction of public debt or unfunded social security has no effect on the longrun equilibrium but implies a transfer of resources from the nonaltruistic to the altruistic agents finally it indicates that inheritance taxation hurts not only the altruists but also the nonaltruists

ricardian equivalence revisited deficits gifts and bequests barro 1974 shows that operative altruistic transfer motives are key for ricardian equivalence to hold this paper evaluates the importance of this mechanism quantitatively by studying deficit financed tax cut experiments i use a heterogeneous agents overlapping generations economy with endogenously operative transfer motives to capture the fact that empirically transfers occur in some but not in all families altruism is calibrated to match aggregate transfer statistics i find that the response of aggregate consumption to a tax cut is in the ballpark of a standard overlapping generations economy that is an economy without altruistic family links welfare implications of this economy however move closer to a dynastic economy

impact of international climate policies on co2 capture and storage deployment illustrated in the dutch energy system a greenhouse gas emission trading system is considered an important policy measure for the deployment of ccs at large scale however more insights are needed whether such a trading system leads to a sufficient high co2 price and stable investment environment for ccs deployment to gain more insights we combined worldscan an applied general equilibrium model for global policy analysis and markal nl uu a techno economic energy bottom up model of the dutch power generation sector and co2 intensive industry worldscan results show that in 2020 co2 prices may vary between 20 tco2 in a grand coalition scenario in which all countries accept greenhouse gas targets from 2020 to 47 tco2 in an impasse scenario in which eu 27 continues its one sided emission trading system without the possibility to use the clean development mechanism markal nl uu model results show that an emission trading system in combination with uncertainty does not advance the application of ccs in an early stage the rates at which different co2 abatement technologies including ccs develop are less crucial for introduction of ccs than the co2 price development and the combination of biomass co firing and ccs seems an important option to realise deep co2 emission reductions

a reexamination of trends in primary commodity prices this paper conducts a reexamination of the prebisch singer hypothesis by employing the unit root test proposed by lee and strazicich 2003 and lee and strazicich 2004 that allow for up to two structural breaks given the higher power of these tests compared to the zivot and andrews 1992 and lumsdaine and papell 1997 tests rejection of the null can be considered as genuine evidence of stationarity the main findings of this paper are that eleven out of twenty four commodity prices are found to be difference stationary implying that shocks to these commodities tend to be permanent in nature the remaining thirteen prices are found to exhibit trend stationary behavior with either one or two structural breaks most of the commodities that do not exhibit difference stationary behavior seem to contain no significant trends there are fewer cases in relation to past studies of commodities that display negative trends thereby weakening the case for the prebisch singer hypothesis

information markets and the comovement of asset prices traditional asset pricing models predict that covariance between prices of difierent assets should be lower than what we observe in the data this model generates high covariance within a rational expectations framework by introducing markets for information about asset payofis when information is costly rational investors will not buy information about all assets they will learn about a subset because information production has high flxed costs competitive producers charge more for low demand information than for high demand information a price that declines in quantity makes investors want to purchase a common subset of information if investors price many assets using a common subset of information then a shock to one signal is passed on as a common shock to many asset prices these common shocks to asset prices generate excess covariance the cross sectional and time series properties of asset price covariance are consistent with this explanation

bio economic modeling of water quality improvements using a dynamic applied general equilibrium approach an integrated bio economic model is developed to assess the impacts of pollution reduction policies on water quality and the economy emission levels of economic activities to water are determined based on existing environmental accounts these emission levels are built into a dynamic economic model for the dutch economy and subsequently coupled to a national water quality model the modular approach has the advantage that the impacts on the economy and water quality are evaluated simultaneously but each within their own domain based on the appropriate scale and level of detail the dynamic nature of the economic model allows us to also evaluate a derogated water policy as foreseen in the european water framework directive the indirect costs of different water quality improvement policy scenarios are at least as high as the direct costs related to investments in pollution abatement technology the stricter the policy scenario the more important the role of economic adjustment and restructuring mechanisms at the macro economic level significant water quality improvements can be achieved through stringent domestic emission reductions however reaching water quality standards is highly dependent on water quality improvement policy in surrounding river basin countries and climate change

convenience yield without the convenience a spatial temporal interpretation of storage under backwardation a mathematical programming model of the wheat marketing system of western australia manifests a typical pattern of regionwide stocks held at a negative intertemporal spread measured at the port no stocks are held at a monetary loss in terms of local prices any apparent loss is an illusion from spatial aggregation of stocks and attribution of incentives at one locality to storers at all locations moreover as the premium for immediate delivery at the port rises stocks increase at relatively inaccessible inconvenient locations where prices are low allowing more to be shipped from locations more convenient to the port

commodity price comovement and financial speculation the case of cotton recent booms and busts in commodity prices have generated concerns that financial speculation causes excessive commodity price comovement driving prices away from levels implied by supply and demand under rational expectations we develop a structural vector autoregression model of a commodity futures market and use it to explain two recent spikes in cotton prices in doing so we make two contributions to the literature on commodity price dynamics first we estimate the extent to which cotton price booms and busts can be attributed to comovement with other commodities finding such comovement would be necessary but would not be sufficient evidence to establish that broad based financial speculation drives commodity prices second after controlling for aggregate demand and comovement we develop a new method to point identify shocks to precautionary demand for cotton separately from shocks to current supply and demand to do so we use differences in volatility across time implied by the rational expectations competitive storage model we find limited evidence that financial speculation caused cotton prices to spike in 2008 or 2011 we conclude that the 2008 price spike was driven mostly by precautionary demand for cotton and the 2011 spike was caused by a net supply shortfall

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

hybrid modelling of long term carbon reduction scenarios for the uk this paper summarizes the development of a new hybrid markal macro m m energy system model for the uk this hybrid model maintains the technological and sectoral detail of a bottom up optimisation approach with aggregated energy demand endogeneity and gdp impacts from a single sector neoclassical growth model the uk m m model was developed for underpinning analysis of the uk s groundbreaking mandatory long term 60 carbon dioxide co2 emissions reduction target hybrid modelling illustrates that long term uk co2 emission reductions are feasible however there are endemic uncertainties notably a trade off between behavioural and technological decarbonisation options with resultant energy system impacts in the requirements for zero carbon electricity uk m m model sensitivity runs further illustrate the range of energy system interactions including the deployment of the uk s limited co2 storage capacity alternate timing of power vs transport sectoral reductions the relative ease of switching between electricity generation portfolios and substitution opportunities between natural gas and coal the macro economic cost impacts range from 0 3 to 1 5 reduction in uk gdp by 2050 with higher cost estimates strongly influenced by pessimistic assessments of future low carbon technologies however cost impacts from the uk m m model are likely to be in the lower range for stringent co2 reduction pathways as the simplicity of the reduced form macro linkage omits competitiveness and transitional impacts on the uk economy c 2008 elsevier b v all rights reserved

can exchange rates forecast commodity prices we show that commodity currency exchange rates have surprisingly robust power in predicting global commodity prices both in sample and out of sample and against a variety of alternative benchmarks this result is of particular interest to policy makers given the lack of deep forward markets in many individual commodities and broad aggregate commodity indices in particular we also explore the reverse relationship commodity prices forecasting exchange rates but find it to be notably less robust we offer a theoretical resolution based on the fact that exchange rates are strongly forward looking whereas commodity price fluctuations are typically more sensitive to short term demand imbalances

ricardian equivalence long run leviathan abstract this paper presents a heterogenous overlapping generations with altruism model in which intergenerational discounting is stochastic the model nests three popular macroeconomics models those of ramsey economic journal 38 152 1928 543 559 diamond american economic review 55 1965 1126 1150 and a variant of the blanchard journal of political economy 93 2 1985 223 247 buiter the economic journal 98 391 1988 279 293 weil journal of public economics 38 2 1989 183 198 model it is shown that under a mild condition originally derived by weil journal of monetary economics 19 3 1987 377 391 the long run capital intensity is robust to practically every popular theoretical criticism of the standard ricardian model these criticisms include the imperfect inheritability of time preference parameters and hence finite horizons on the part of all households myopia in the form of overly discounting the future borrowing constraints distortionary labor taxation exchange strategic bequest motives common cultural constraints egalitarian bequests and primogeniture endogenous fertility and joy of giving while precautionary saving can theoretically violate long run neutrality the asymptotic capital intensity is still bounded below by preference parameters the overall conclusions are sharply at odds with those found in most articles dealing with the theoretical foundations of ricardian equivalence

maximum likelihood estimation of the standard commodity storage model evidence from sugar prices we present a maximum likelihood estimator for the standard commodity storage model with stockouts based on prices only while it imposes no additional assumptions on the model the maximum likelihood estimator has small sample properties superior to those of the pseudo maximum likelihood approach we provide a proof that is crucial for applying our estimator to the model with normal harvests and possibly unbounded prices thereby eliminating an inconsistency in the empirical storage model literature applying our maximum likelihood estimator to a series of annual sugar prices from 1921 to 2009 provides new evidence for the empirical relevance of the standard storage model our results imply a cutoff price at which discretionary stocks go to zero which is higher than the price obtained by applying the pseudo maximum likelihood estimator to the same data the implied frequency of stockouts is lower and price correlations skewness and kurtosis implied by the model closely match those seen in the annual sugar price data we find the price of sugar to be highly responsive to small changes in consumption when inventories are not available to buffer the effects of negative supply shocks on consumption prices must increase sharply to induce the consumption changes needed to clear the market our results show why production shocks are not necessarily aligned with price spikes the same production shock can give rise to very different price responses depending on whether or not there are sufficient stocks to buffer its impact

optimal timing in the problem of family farm transfer from parent to child an option value approach abstract the optimal time for transferring the family farm from parent to child is modeled in an option value framework it is assumed that parents have the ability to wait and enrich their information set before making the decision when to transfer the farm to a succeeding child rather than making a prompt decision the results indicate that the optimal timing depends on the wedge between the parents critical level of utility and disutility from the farm transfer to a succeeding child the arguments of parents utility function are country culture and family specific

combining bottom up and top down abstract we motivate the formulation of market equilibrium as a mixed complementarity problem which explicitly represents weak inequalities and complementarity between decision variables and equilibrium conditions the complementarity format permits an energy economy model to combine technological detail of a bottom up energy system with a second best characterization of the over all economy our primary objective is pedagogic we first lay out the complementarity features of economic equilibrium and demonstrate how we can integrate bottom up activity analysis into a top down representation of the broader economy we then provide a stylized numerical example of an integrated model within both static and dynamic settings finally we present illustrative applications to three themes figuring prominently on the energy policy agenda of many industrialized countries nuclear phase out green quotas and environmental tax reforms

demand effects and speculation in oil markets theory and evidence abstract we present evidence showing the existence of stable cointegrating vectors connecting four important variables in the u s and global oil markets oil production stocks of crude oil the real price of oil and broad measures of income our data are monthly and go back to the 1930s split into sub samples which correspond to periods before and after the 1973 crisis we further show that the cointegrating vectors found in the data accord well with an extended commodity storage model which allows for demand growth dynamics and for supply regimes specifically inventories and price move in opposite directions when supply is flexible but the relationship reverses so that they comove when supply is inflexible

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

borrowing costs and the demand for equity over the life cycle abstract we construct a life cycle model that delivers realistic behavior for both equity holdings and borrowing the key model ingredient is a wedge between the cost of borrowing and the risk free investment return borrowing can either raise or lower equity demand depending on the cost of borrowing a borrowing rate equal to the expected return on equity which we show roughly matches the data minimizes the demand for equity alternative models with no borrowing or limited borrowing at the risk free rate cannot simultaneously fit empirical evidence on borrowing and equity holdings

autoregressive conditional heteroscedasticity in commodity spot prices muth s 1961 rational expectations model of commodity markets implies that inventory carryover creates arch processes in prices the model also indicates that the expected price variance is an explanatory variable in price regressions hypotheses were tested on price data of twenty commodities using a variation of engle et al 1987 arch m technique an arch process was found in storable and not in non storable commodity data as expected however changes in expected price variance have no significant impact on price copyright 2001 john wiley sons ltd

estimating a nonlinear rational expectations commodity price model with unobservable state variables this paper is concerned with the estimation of a model in which a possibly serially correlated stochastic process the harvest of an agricultural commodity generates a competitive price in a market comprising both final consumers and risk neutral speculators who can store the commodity at a cost in the anticipation of profit because storage cannot be negative the relationship between prices and harvests is inherently nonlinear and is an unpromising candidate for a linear quadratic model or for linearization more generally instead we calculate numerically a policy function in which price is a function of two unobservable state variables the harvest and current availability and we use the result to fit the price data

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

motives for private transfers over the life cycle an analytical framework and evidence for peru abstract this paper tests for the motives for private income transfers we consider two motives altruism and exchange the question of private transfer motives is important because such motivation can influence the effects of public income transfers on the distribution of income using a household survey for peru we find that transfer amounts received increase with recipient pre transfer income which contradicts a key prediction of the strong form of the altruism hypothesis but is consistent with exchange we also find that capital market imperfections are likely to be an important cause of private transfers and that social security benefits crowd out the incidence of private transfers

the unholy trinity of financial contagion over the last 20 years some financial events such as devaluations or defaults have triggered an immediate adverse chain reaction in other countries which we call fast and furious contagion yet on other occasions similar events have failed to trigger any immediate international reaction we argue that fast and furious contagion episodes are characterized by the unholy trinity i they follow a large surge in capital flows ii they come as a surprise and iii they involve a leveraged common creditor in contrast when similar events have elicited little international reaction they were widely anticipated and took place at a time when capital flows had already subsided

estimating the competitive storage model with trending commodity prices we present a method to estimate jointly the parameters of a standard commodity storage model and the parameters characterizing the trend in commodity prices this procedure allows the influence of a possible trend to be removed without restricting the model specification and allows model and trend selection based on statistical criteria the trend is modeled deterministically using linear or cubic spline functions of time the results show that storage models with trend are always preferred to models without trend they yield more plausible estimates of the structural parameters with storage costs and demand elasticities that are more consistent with the literature they imply occasional stockouts whereas without trend the estimated models predict no stockouts over the sample period for most commodities moreover accounting for a trend in the estimation imply price moments closer to those observed in commodity prices our results support the empirical relevance of the speculative storage model and show that storage model estimations should not neglect the possibility of long run price trends

macro micro feedback links of water management in south africa cge analyses of selected policy regimes the pressure on an already stressed water situation in south africa is predicted to increase significantly under climate change plans for large industrial expansion observed rapid urbanization and government programs to provide access to water to millions of previously excluded people the present study employed a general equilibrium approach to examine the economy wide impacts of selected macro and water related policy reforms on water use and allocation rural livelihoods and the economy at large the analyses reveal that implicit crop level water quotas reduce the amount of irrigated land allocated to higher value horticultural crops and create higher shadow rents for production of lower value water intensive field crops such as sugarcane and fodder accordingly liberalizing local water allocation in irrigation agriculture is found to work in favor of higher value crops and expand agricultural production and exports and farm employment allowing for water trade between irrigation and non agricultural uses fueled by higher competition for water from industrial expansion and urbanization leads to greater water shadow prices for irrigation water with reduced income and employment benefits to rural households and higher gains for non agricultural households the analyses show difficult tradeoffs between general economic gains and higher water prices making irrigation subsidies difficult to justify

the welfare impact of self supplied water pricing in canada a computable general equilibrium assessment this paper uses a computable general equilibrium model to assess the welfare cost of changing the method of water allocation in canada towards one that uses prices to ration demand we model the introduction of a price on both water that is abstracted as well as water that is consumed that is abstracted and not returned to the source we estimate that reducing water consumption by 25 would require imposition of a price on water consumption of around 0 21 text m 3 similarly introduction of a water abstraction charge of about 0 013 text m 3 would be sufficient to reduce water abstraction by 25 we find that if revenues from water pricing are returned in lump sum to households the introduction of water pricing would result in a modest welfare loss when revenues from water pricing are used to offset existing taxes we find a gain in welfare corresponding to a strong double dividend

altruism in networks we provide the first analysis of altruism in networks agents are embedded in a fixed network and care about the well being of their network neighbors depending on incomes they may provide financial support to their poorer friends we study the nash equilibria of the resulting game of transfers we show that equilibria maximize a concave potential function we establish existence uniqueness of equilibrium consumption and generic uniqueness of equilibrium transfers we characterize the geometry of the network of transfers and highlight the key role played by transfer intermediaries we then study comparative statics a positive income shock to an individual benefits all for small changes in incomes agents in a component of the network of transfers act as if they were organized in an income pooling community a decrease in income inequality or expansion of the altruism network may increase consumption inequality

the timing of intergenerational transfers tax policy and aggregate savings the authors analyze an overlapping generations framework that accommodates two observations 1 the interest rate on consumption loans exceeds the rate of return to savings and 2 private intergenerational transfers primarily occur early in the life cycle assuming altruistically motivated transfers in at least some family lines and other plausible conditions the authors prove the invariance of capital s steady state marginal product to government debt government expenditures and the tax rates on labor and capital income the authors show that the tax treatment of household interest payments has powerful effects on capital intensity and aggregate savings in life cycle and especially altruistic linkage models copyright 1992 by american economic association

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

a theory of commodity price fluctuations this paper studies the price fluctuations of storable commodities that are traded in open markets and are subject to random shocks to demand or more particularly to supply it relaxes the common assumption that the shocks are identically and independently distributed in favor of temporally dependent and periodic disturbances the existence of a unique stationary rational expectations equilibrium is demonstrated for each of the models analyzed and testable implications of the models are derived an illustrative empirical investigation is then undertaken for the model with periodic disturbances using monthly time series observations for seven commodities over the period 1960 93

the sectoral and regional economic consequences of climate change to 2060 this paper presents a new detailed global quantitative assessment of the economic consequences of climate change i e climate damages to 2060 the analysis is based on an assessment of a wide range of impacts changes in crop yields loss of land and capital due to sea level rise changes in fisheries catches capital damages from hurricanes labour productivity changes and changes in health care expenditures from diseases and heat stress changes in tourism flows and changes in energy demand for cooling and heating a multi region multi sector dynamic computable general equilibrium model is used to link different impacts until 2060 directly to specific drivers of economic growth including labour productivity capital stocks and land supply as well as assess the indirect effects these impacts have on the rest of the economy and on the economies of other countries it uses a novel production function approach to identify which aspects of economic activity are directly affected by climate change the model results show that damages are projected to rise twice as fast as global economic activity global annual gross domestic product losses are projected to be 1 0 3 3 by 2060 of the impacts that are modelled impacts on labour productivity and agriculture are projected to have the largest negative economic consequences damages from sea level rise grow most rapidly after the middle of the century damages to energy and tourism are very small from a global perspective as benefits in some regions balance damages in others climate induced damages from hurricanes may have significant effects on local communities but the macroeconomic consequences are projected to be very small net economic consequences are projected to be especially large in africa and asia where the regional economies are vulnerable to a range of different climate impacts for some countries in higher latitudes economic benefits can arise from gains in tourism energy and health the global assessment also shows that countries that are relatively less affected by climate change may reap trade gains

water competition through the water energy nexus assessing the economic impacts of climate change in a mediterranean context abstract the impacts of climate change on water resources availability are expected to be adverse especially in drier climate regions such as the mediterranean increased water scarcity will exacerbate competition for water resources not only between sectors but also between countries sharing transboundary river basins due to the mutual dependence of the energy sector on water resources and of the water services provision sector on energy inputs the water energy nexus is acknowledged as a major challenge for the near future with hydropower representing one of the most direct links in this nexus the aim of this paper is to assess the economy wide impacts of the concurrent effects of climate change driven impacts on water availability and the sectoral and regional competition for scarcer water resources in order to accomplish that goal an integrated modelling approach is developed where a computable general equilibrium model including raw water as a production factor is linked to times pt a bottom up model of the energy sector a case study is provided for the mediterranean country of portugal results for 2050 show that macroeconomic impacts are significant and encompass important inter sectoral differences that in turn depend on the degree of competition between sectors impacts are stronger when water consumption by spanish sectors is considered as this intensifies water scarcity in portugal thus the paper allows to gain insight in the broader water energy economy nexus and the additional costs that the dependence on water resources availability in transboundary river basins represents to an economy both aspects being of utmost importance for climate adaptation and energy policy making

world supply and demand of food commodity calories between the summers of 2006 and 2008 corn prices more than tripled from roughly 2 50 bushel to nearly 8 00 bushel prices for rice soybeans and wheat rose by similar or greater amounts the exceptionally large and unanticipated rise in prices was attributed to many factors including 1 ethanol subsidies 2 commensurately rising oil prices 3 unexpectedly large demand growth from china and india and 4 weatherrelated factors such as drought in australia while some have argued that the commodity price boom much like earlier housing and stock market booms were due to a

parental altruism and inter vivos transfers theory and evidence this paper uses psid data on the extended family to test whether inter vivos transfers from parents to children are motivated by altruism specifically the paper tests whether an increase by one dollar in the income of parents actively making transfers to a child coupled with a one dollar reduction in that child s income results in the parents increasing their transfer to the child by one dollar this restriction on parental and child transfer income derivatives is derived for the standard altruism model augmented to include uncertainty and liquidity constraints these additional elements pin down the timing of inter vivos transfers the method used to estimate income transfer derivatives takes into account unobserved heterogeneity across families in the degree of altruism the findings strongly reject the altruism hypothesis redistributing one dollar from a recipient child to donor parents leads to less than a 13 cent increase in the parents transfer to the child far less than the one dollar increas

water scarcity and the impact of improved irrigation management a computable general equilibrium analysis increasing water scarcity combined with an increasing demand for food and water for irrigation call for a careful revision of water use in agriculture currently less than 60 of all the water used for irrigation is effectively used by crops based on the new version of the gtap w model we analyze the effect of potential water savings and the welfare implications of improvements in irrigation efficiency worldwide the results show that a water policy directed to improve irrigation efficiency led to global and regional water savings but it is not beneficial for all regions the final effect on regional welfare will depend on the interaction of several different causes for instance higher irrigation efficiency changes opportunity costs and reverses comparative advantages modifying regional trade patterns and welfare for water stressed regions the effects on welfare are mostly positive for nonwater scarce regions the results are more mixed and mostly negative the results show that exports of virtual water are not exclusive of water abundant regions

a short note on updating the grilli and yang commodity price index the grilli and yang commodity price index is one of the most widely used commodity price series in the applied economics literature this note provides some practical advice on updating this data series by listing the base period index values identifying relevant data sources and describing a method for computing subindex weights in 1988 enzo grilli and maw cheng yang published their seminal article on the long run development of an index of 24 primary commodity prices gycpi deflated by an index of manufactured goods unit values the sample of average annual primary commodity prices covers about 54 percent of the primary commodity trade in the index reference period 1977 79 the deflators considered for manufacturing prices were the u s manufacturing price index usmpi and the manufacturing unit value index muv 1widely used and discussed the grilli and yang data set has been extended by a number of researchers the data have been employed in a variety of contexts in later studies thus the gycpi data continue to enjoy wide popularity in their own right and as a benchmark for new approaches to empirical studies

an integrated economic and distributional analysis of energy policies most public policies particularly those in the energy sphere have not only efficiency but also distributional effects however there is a trade off between modelling approaches suitable for calculating those impacts on the economy for the former most of the studies have been conducted with general equilibrium models whereas partial equilibrium models represent the main approach for distributional analysis this paper proposes a methodology to simultaneously carry out an analysis of the distributional and efficiency consequences of changes in energy taxation in order to do so we have integrated a microeconomic household demand model and a computable general equilibrium model for the spanish economy we illustrate the advantages of this approach by simulating a revenue neutral reform in spanish indirect taxation with a large increase of energy taxes that serve an environmental purpose the results show that the reforms bring about significant efficiency and distributional effects in some cases counterintuitive and demonstrate the academic and social utility of this approximation

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

real effects of information frictions when the states and the kingdom became united abstract this paper exploits a unique historical experiment to estimate how information frictions distort international trade the establishment of the transatlantic telegraph in 1866 i use newly collected data on cotton prices trade and information flows from historical newspapers and find that the average and volatility of the transatlantic price difference fell after the telegraph while average trade flows increased and became more volatile using a trade model in which exporters use the latest news about a foreign market to forecast expected prices i estimate the efficiency gains of the telegraph to be equivalent to 8 percent of export value jel d83 f12 f14 l96 n71 n73

commodity prices money surprises and fed credibilit strict monetarist theory in an extreme form holds that excessive money growth or the expectation of future money growth shows up immediately in the rapid inflation of goods prices however it is widely argued that for most goods prices are in fact sticky in the short run and reflect money growth only in the long run if one seeks a sensitive market measure of the perceived looseiless or tightness of monetary policy one must look elsewhere than at the general price level interest rates being determined in quickly adjusting financial markets are free to respond immediately to expectations regarding monetary policy in 1981 and 1982 every friday at 4 10 p m eastern standard time the federal reserve board would announce the money stock for the week ending nine days previously if the announced money stock was different from what the market had been expecting interest rates generally jumped in the same direction clearly they were responding to revisions of the expected future path of the money stock but nominal interest rates are an ambiguous indicator of expectations on the one hand an announced increase in the money stock may be received by the market as indicating a higher

designing an emissions trading scheme for china an up to date climate policy assessment abstract we assess recent chinese climate policy proposals in a multi region multi sector computable general equilibrium model with a chinese carbon emissions trading scheme ets when the emissions intensity per gdp in 2020 is required to be 45 lower than in 2005 the model simulations indicate that the climate policy induced welfare loss in 2020 measured as the level of gdp and welfare in 2020 under climate policy relative to their level under business as usual bau in the same year is about 1 the chinese welfare loss in 2020 slightly increases in the chinese rate of economic growth in 2020 when keeping the emissions target fixed at the 2020 level after 2020 in absolute terms the welfare loss will reach about 2 in 2030 if china s annual economic growth rate is 0 5 percentage points higher lower the climate policy induced welfare loss in 2030 will rise decline by about 0 5 percentage points full auctioning of carbon allowances results in very similar macroeconomic effects as free allocation but full auctioning leads to higher reductions in output than free allocation for ets sectors linking the chinese to the european ets and restricting the transfer volume to one third of the eu s reduction effort creates at best a small benefit for china yet with smaller sectoral output reductions than auctioning these results highlight the importance of designing the chinese ets wisely

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

identifying supply and demand elasticities of agricultural commodities implications for the us ethanol mandate we present a new framework to identify supply elasticities of storable commodities where past shocks are used as exogenous price shifters in the agricultural context past yield shocks change inventory levels and futures prices of agricultural commodities we use our estimated elasticities to evaluate the impact of the 2009 renewable fuel standard on commodity prices quantities and food consumers surplus for the four basic staples corn rice soybeans and wheat prices increase 20 per cent if one third of commodities used to produce ethanol are recycled as feedstock with a positively skewed 95 percent confidence interval that ranges from 14 to 35 per cent jel q11 q16 q42 q48

market news in commodity price theory application to the ethiopian grain market this paper examines the effect of news or advance information about future production on competitive storage behaviour and prices using a structural model of commodity markets in particular it generalizes the neoclassical storage model to incorporate information on future harvests while allowing for seasonal production two features important to african and other developing country grain markets the model is first developed to suit the case of the ethiopian grain markets and a general model is then stated the effects on welfare and price variability of the addition of news are discussed as well as changes in key demand and uncertainty parameters the model is shown to replicate some features of the data better than the model without news particularly the high autocorrelation in price and performs better in formal estimation however it appears that the incorporation of news still fails to explain the extreme seasonal price movements observed copyright 2004 wiley blackwell