estimating the price premium of lng in korea and japan the price formula approach abstract focusing on the price premium which reflects the negotiation power of exporting and importing countries this study empirically investigates the liquefied natural gas lng price formula for korea and japan applying the state space model and kalman filter to the price formula adopted in the lng contracts in the asia pacific region this study estimates the long run price formula and time varying premiums on the lng import prices by trade routes from qatar oman indonesia and malaysia to korea and japan furthermore this study also discusses the differences between korea and japan and the event based changes in the price premiums namely the appearance of russia as a new supplier to korea and japan in april 2009 and the fukushima nuclear disaster in march 2011 the estimation results show that the appearance of a new supplier does not always lead to a decrease in the premium in addition lng importers in northeast asia should pay attention to demand and supply in europe as well as asia because northeast asia and europe share the same middle eastern exporting countries furthermore korea japan and other northeast countries need to establish close cooperation to enhance their negotiation power within the global lng market

in search of insights into the generation of techno economic trends micro and macro constituencies in the microprocessor industry abstract in the field of technology policy few challenges are more intriguing than understanding the nature of technical and market trends this paper deals with this problem by using the sociotechnical constituencies approach in order to integrate the treatment of micro macro issues from product to industry the case study is that of the microprocessor industry where at present a risc reduced instruction set computer technology is emerging in a field where a powerful and far from exhausted cisc complex instruction set computer technology tends to occupy almost every segment of the market the analysis reveals how emerging product constituencies do implement pro active trend creating strategies in order to establish themselves as industrial trends and by so doing they simultaneously re define the existing content of the macro industrial level the study also reveals the important role of the nature and maturity of microprocessor technology in conditioning the constituency building strategies implemented by different players microprocessor technology is specifically characterised as an architectural codified knowledge component with indirect network externalities and weak appropriability regime finally the paper also highlights the potential risks of both fragmentation and complete proprietary control of technology in technological processes involving strongly competitive situations

measuring vulnerability to shocks in the gas market in south america abstract with a strong global demand for some 30 years natural gas is a particular challenge for countries of south and central america since each cubic meter of natural gas that is consumed is produced in this continent it therefore seems appropriate to consider the risk of a collision gas and its effects on the countries most dependent on gas either as producers or as consumers thus in this paper we study the vulnerability of gas in several countries on four ratios developed by cabalu 2010 once calculated from empirical data these ratios helped to determine indicators and to classify countries according to their vulnerability in the event of a gas shock sudden rise in prices a picture emerges which represents an indicative classification of the countries

democracy volatility and economic development growth stability is an important objective because development requires sustained increases in income because volatility is costly for the poor and because volatility deters growth we study the determinants of average growth and its volatility as a two equation system and find that higher levels of democracy and diversification lower volatility whereas volatility itself reduces growth muslim countries instrument for democracy and measures of diversification identify volatility in contrast to the lack of consensus on the democracy growth relationship the democracy stability link is robust rather than focus on growth this paper forges an alternative link between democracy and development through the volatility channel

democracy and economic growth a meta analysis despite a sizeable theoretical and empirical literature no firm conclusions have been drawn regarding the impact of political democracy on economic growth this article challenges the consensus of an inconclusive relationship through a quantitative assessment of the democracy growth literature it applies meta regression analysis to the population of 483 estimates derived from 84 studies on democracy and growth using traditional meta analysis estimators the bootstrap and fixed and random effects meta regression models it derives several robust conclusions taking all the available published evidence together it concludes that democracy does not have a direct impact on economic growth however democracy has robust significant and positive indirect effects through higher human capital lower inflation lower political instability and higher levels of economic freedom democracies may also be associated with larger governments and less free international trade there also appear to be country and region specific democracy growth effects overall democracy s net effect on the economy does not seem to be detrimental

conceptualization of energy security in resource poor economies the role of the nature of economy abstract this paper studies how energy security is conceptualized in four resource poor advanced island economies singapore south korea japan and taiwan it is found that the energy security conceptualization of the four economies in effect returns to the very original and conventional one stable and reliable energy supply however these economies are different in the level of stability and reliability demanded why are they similar in energy security conceptualization whereas different in the level of stability and reliability demanded adopting documentation analysis comparative study and the varieties of capitalism theory we find that the nature of economy constitutes the decisive factor that shapes energy security conceptualization the coordinated market economies cmes are more concerned about energy supply disruption than the liberalized market economies lmes the paper demonstrates that despite numerous energy security concepts in the literature resource poor economies still adopt the original and conventional one in practice the findings suggest that security of supply is the top measure for resource poor economies to improve their energy security and creating a joint petroleum and lng market would be desirable for the four economies in this study

stochastic convenience yield and the pricing of oil contingent claims this paper develops and empirically tests a two factor model for pricing financial and real assets contingent on the price of oil the factors are the spot price of oil and the instantaneous convenience yield the parameters of the model are estimated using weekly oil futures contract prices from january 1984 to november 1988 and the model s performance is assessed out of sample by valuing futures contracts over the period november 1988 to may 1989 finally the model is applied to determine the present values of one barrel of oil deliverable in one to ten years time

evaluating natural resource investments notwithstanding impressive advances in the theory of finance over the past 2 decades practical procedures for capital budgeting have evolved only slowly the standard technique which has remained unchanged in essentials since it was originally proposed see dean 1951 bierman and smidt 1960 derives from a simple adaptation of the fisher 1907 model of valuation under certainty under this technique expected cash flows from an investment project are discounted at a rate deemed appropriate to their risk and the resulting present value is compared with the cost of the project this standard textbook technique reflects modern theoretical developments only insofar as estimates of the discount rate may be obtained from crude application of single period asset pricing theory but see brennan 1973 bogue and roll 1974 turnbull 1977 constantinides 1978 the inadequacy of this approach to capital budgeting is widely acknowledged although not widely discussed its obvious deficiency is its the evaluation of mining and other natural resource projects is made particularly difficult by the high degree of uncertainty attaching to output prices it is shown that the techniques of continuous time arbitrage and stochastic control theory may be used not only to value such projects but also to determine the optimal policies for developing managing and abandoning them the approach may be adapted to a wide variety of contexts outside the natural resource sector where uncertainty about future project revenues is a paramount concern

global impact of uncertainties in china s gas market abstract this paper examines the uncertainties in chinese gas markets analyze the reasons and quantify their impact on the world gas market a literature review found significant variability among the outlooks on china s gas sector further assessment found that uncertainties in economic growth structural change in markets environmental regulations price and institutional changes contribute to the uncertainties the analysis of china s demand and supply uncertainties with a world gas trading model found significant changes in global production trade patterns and spot prices with pipeline exporters being most affected china s domestic production and pipeline imports from central asia are the major buffers that can offset much of the uncertainties the study finds an asymmetric phenomenon pipeline imports are responding to china s uncertainties in both low and high demand scenarios while lng imports are only responding to high demand scenario the major reasons are higher top levels and the current practice of import only up to the minimum top levels for lng as well as a lack of liberalized gas markets the study shows that it is necessary to create lng markets that can respond to market dynamics through either a reduction of top levels or change of pricing mechanisms to hub indexation

the asia pacific natural gas market large enough for all abstract among natural gas producing nations there has been some concern about how the asia pacific will meet future demand for energy we argue that natural gas both regional and global will play a vital role estimates of potential gas consumption in the region are analyzed and used to develop consensus projections to 2030 these consumption profiles are compared with gas supply estimates including indigenous pipeline and lng for the asia pacific market from this analytical framework we find that demand will be sufficiently large to accommodate supplies from diverse sources including north america the middle east central asia russia and the asia pacific itself an important policy implication is that gas producing and consuming nations should benefit from promoting gas trade and not be concerned about a situation of potential lack of demand coupled with oversupply

efficient adaptation in long term contracts take or pay provisions for natural gas to mitigate the inflexibility of long term contracting for natural gas parties will look for terms that minimize the need for costly adjudication while maintaining incentives for appropriate adaptation the authors examine the incident of take or pay provisions in contracts between natural gas producers and pipelines from this perspective they argue that take obligations can be viewed as a mechanism for effecting appropriate incentives for contractual performance and show that efficient breach considerations define an optimal take percentage as a function of characteristics of the transaction these incentives are distorted by regulated price ceilings which cause the adoption of take obligations in excess of optimal levels the findings refute the common perception that take or pay provisions are just an artifact of wellhead price regulation and serve no useful purpose in the absence of regulation 20 references 1 figure 1 table

pretia ex machina prices and process in long term contracts aimong the primary motives for writing contracts identified in both the law and economics literatures is the desire to protect against the hazards inherent to exchange where one or both parties have invested in reliance or relationship specific assets in support of the transaction because such investments have a higher value in their intended than in their next best use parties have an incentive to engage in haggling or other forms of opportunism in hopes of influencing the distribution of the resulting quasi rents contracts promote efficiency by securing the distribution of those rents ex ante thereby avoiding costly repetitive bargaining over the terms of trade and reducing the risk for each party of relying on the performance of the other in reality this description of the role and functioning of contracting is oversimplified as a number of legal and economic scholars have emphasized contracts are not the precise mechanically enforced documents often encountered in economic theory 2 indeed contracts are extremely

take or pay contract robustness a three step story told by the brazil bolivia gas case abstract neo institutional economics nei has long shown that take or pay top long term contracts provide a robust framework for safeguarding the interests of both upstream and downstream parties in the gas industry the case of gas trade between brazil and bolivia presents an opportunity to re examine empirically and to review the robust nature of the top framework over time this case reveals that the positions of the contractors actually change giving rise to a veritable lifecycle of the contractual arrangement such a contract can be seen to span three successive phases the first phase of the contract cycle begins when it is signed allowing the investments to begin the second phase starts when investments have been completed and the actual trade in gas begins the third phase of the contract cycle comes when the increasing flow of gas comes close to saturating capacity and the volume levels for downstream market volume have been reached these three contract phases are thus distinguished by how robust the alignment of the parties interests is the added value of the paper is then both empirical and analytical the case study provides a brand new lifecycle analysis of the performance of top long term contracting into an nei framework

democracy political risks and stock market performance this study examines the impacts of democracy and political risk on stock market using annualized panel data for 49 emerging markets for 2000 2012 we find evidence that democracy and political risk do have impact on stock market returns and the relationship between democracy and political risk is parabolic i e there is a threshold level of democracy after which political risk begins to decline also our results suggest that decreases in political risk lead to higher returns

the impact of the north american shale gas revolution on regional natural gas markets evidence from the regime switching model this paper investigates the impact of the north american shale gas revolution on price movement regimes in the north american and european gas markets using the markov regime switching model it then measures price spreads between oil and gas from 1998 to 2015 to identify the impact of the revolution on the relationship between oil and regional gas prices the results show that the typical movement regime of henry hub prices changes from slightly upward to sharply downward in addition the clear seasonal effect of henry hub prices has disappeared after the shale gas revolution the typical movement of national balancing point nbp prices has changed gradually from a sharply upward regime to the alternative regimes between sharply downward and slightly upward tending to follow oil prices this indicates that the shale gas revolution has had little impact on nbp price movement meanwhile henry hub prices have decoupled from wti prices while nbp and brent prices have continued to exhibit a long term equilibrium level around which they have swung in the short time frame since the shale gas revolution pertinent energy policy makers and energy market participants should pay attention to these changes and adjust their trade production and investment strategies accordingly

what can be learned from the free destination option in the lng imbroglio we examine the profitability of flexible routing by lng cargoes for a single supplier taking into account uncertainty in the medium term dynamics of gas markets first we model the trajectory of natural gas prices in asia northern america and europe using a threshold vector autoregression representation tvar in which the system s dynamics switches back and forth between high and low regimes of oil price volatility we then use the generalized impulse response functions girf obtained from the estimated threshold model to analyze the effects of volatility shocks on the regional gas markets dynamics lastly the valuation of destination flexibility in lng supplies is conducted using a real option approach we generate a sample of possible future regional price trajectories using monte carlo simulations of our empirical model and determine for each trajectory the optimal shipping decisions and their profitability our results portend a substantial source of profit for the industry and reveal future movements of vessels we discuss the conditional impact of destination flexibility on the globalization of natural gas markets

oil indexation market fundamentals and natural gas prices an investigation of the asian premium in natural gas trade abstract a heated debate has arisen over whether the asian premium i e higher prices in asia than elsewhere in natural gas trade is due to price discrimination or different market fundamentals determining the origin of this premium can help to guide the gas industries and policy makers in asia especially when the traditional oil indexed price mechanism fades away using a new systemic time series approach this paper explores the extent to which oil prices and market fundamentals contribute to variations in gas prices in japan the united states and germany we find clear cross country differences and time varying patterns gas prices are much less affected by supply and demand factors than oil prices in japan and germany whereas these factors are more important than oil prices in the us market which has a pricing hub through rolling windows and subsample analysis we discover that oil prices were important in japan and germany but the level of importance has declined significantly in recent years though the contribution of fundamentals does not change much the results show that asian gas prices are determined more by oil prices than by the market fundamentals thus the asian premium is more likely due to this oil indexed pricing mechanism rather than market fundamentals this suggests that developing asia s benchmark prices through trading hubs with a better reflection of regional specific fundamentals can lead to a more efficient allocation of gas resources

towards a dynamic schumpeterian welfare economics knowledge plays an increasingly important role in shaping the dynamics of an economy a static paretian welfare economics is therefore inadequate and needs to be supplemented by a dynamic schumpeterian welfare theory a dynamic welfare economics acknowledges the role of knowledge and communication as knowledge develops cumulatively in a social environment knowledge may not be readily diffused or exchanged different costs of communication need to be considered each affecting the creation of new knowledge recent developments in intellectual property right ipr law are evaluated to determine the extent to which they affect communication costs and thus future economic welfare

predicting price spikes in electricity markets using a regime switching model with time varying parameters this paper shows that a stochastic regime switching model can represent the volatile behavior of wholesale electricity prices associated with price spikes effectively the structure of the model is very flexible because the mean prices in the two regimes and the two transition probabilities are functions of the load and or the implicit reserve margin using price data from the single settlement market in pjm may 1999 to may 2000 the results show that the estimated switching probability from the low to the high regime predicts price spikes well if the reserve margin is measured accurately

options on the minimum or the maximum of two risky assets analysis and applications this paper provides analytical formulas for european put and call options on the minimum or the maximum of two risky assets the properties of these formulas are discussed in detail options on the minimum or the maximum of two risky assets are useful to price a wide variety of contingent claims of interest to financial economists applications discussed in this paper include the valuation of foreign currency debt option bonds compensation plans risk sharing contracts secured debt and growth opportunities involving mutually exclusive investments

political risk in emerging and developed markets using analyst estimates of political risk we show that political risk represents a more important determinant of stock returns in emerging than developed markets average returns in emerging markets experiencing decreased political risk exceed those of emerging markets experiencing increased political risk by approximately 11 per quarter in contrast the difference is only 2 5 per quarter for developed markets further the difference between the impact of political risk in emerging and developed markets is statistically significant we also document a global convergence in political risk over the last 10 years political risk has decreased in emerging markets and increased in developed markets if this trend continues the differential impact of political risk in emerging vs developed markets may narrow

real options for risk management in petroleum development investments irreversible investments made with incomplete information are the mainstay of the petroleum industry sequential non repetitive investment decisions with alternative pathways associated with exploration through full field development are common we demonstrate a policy development approach that combines the bellman equation for dynamic programming with a real options valuation algorithm this represents the first demonstration of the mathematical union of the two techniques for branching decision pathways producing a generalized policy development framework that provides risk management of investments production expansion investment decisions for a central asian gas condensate field are analyzed using the framework

short term variations and long term dynamics in commodity prices in this article we develop a two factor model of commodity prices that allows meanreversion in short term prices and uncertainty in the equilibrium level to which prices revert although these two factors are not directly observable they may be estimated from spot and futures prices intuitively movements in prices for long maturity futures contracts provide information about the equilibrium price level and differences between the prices for the short and long term contracts provide information about short term variations in prices we show that although this model does not explicitly consider changes in convenience yields over time this short term long term model is equivalent to the stochastic convenience yield model developed in gibson and schwartz 1990 we estimate the parameters of the model using prices for oil futures contracts and apply the model to some hypothetical oil linked assets to demonstrate its use and some of its advantages over the gibson schwartz model

capital flight and political risk abstract this paper provides the first serious attempt to examine the relationship between political risk and capital flight for a large set of developing countries the outcomes of the analysis show that in most cases political risk variables do have a statistically robust relationship to capital flight once domestic and international macroeconomic circumstances are added at least when the robustness test as proposed by sala i martin is applied we conclude that on the basis of the analysis in this paper we have found support for the hypothesis that political risk leads to increased capital flight

cooperation among liquefied natural gas suppliers is rationalization the sole objective this paper examines the development of cooperative strategies between countries exporting liquefied natural gas lng and members of the gas exporting countries forum gecf this economic study focuses specifically on an often raised scenario the emergence of a cooperative approach designed with the sole aim of logistic rationalization and which would not have any effect on lng prices we first assess the annual gains that may result from this market power free cooperative approach using a simple static transportation model the numerical results obtained suggest that in the absence of a gain redistribution policy this cooperative strategy will probably not be adopted because cooperation would not be a rational move for some exporters the problem of gain sharing is then formulated using cooperative game theory concepts several gain sharing methods have been studied including the shapley value and various nucleolus inspired concepts our results suggest that the choice of a redistribution policy appears relatively restricted out of the methods studied only one per capita nucleolus satisfies two key requirements core belonging and monotonicity in the aggregate lastly we look at how cooperation may give rise to a coordination cost and try to determine the maximum amount of this cost in view of the low level of this amount and the relative complexity of the sharing method implemented we consider that the credibility of a logistic cooperation scenario exempt from market power should be reappraised

institutions in european and asian energy markets a methodological overview abstract this article introduces a methodological framework to study institutions in european and asian energy markets with a comparative case study on the eu and east asia a distinction is made between informal and three types of formal institutions and their transaction cost reducing order creating and ecological climatic functions the operation of energy markets is explained through the structure of institutions their types and functions it is found that order creating institutions guarantee enough stability mutual trust and solidarity among eu member states to support the competitive markets institution and supranational formal institutions as the underpinnings of trade in the internal energy market which nevertheless retains some corporatist features in the east asian markets the nature of order creating institutions sovereignty energy diplomacy and great power management prevents the emergence of supranational formal institutions and a shared idea of trade the prevailing structure has a large number of sub regional organisations with overlapping tasks and few powers in both markets the functions of institutions signify more than their number transaction cost reducing institutions are dependent on order creating institutions while both of these functions are better realised on the regional level than ecological climatic functions ultimately informal institutions are most influential

gas market distorting effects of imbalanced gas balancing rules inefficient regulation of pipeline flexibility this paper analyzes the value and cost of line pack flexibility in liberalized gas markets through examination of the techno economic characteristics of gas transport pipelines and the trade offs between different ways to use the infrastructure transport and flexibility line pack flexibility is becoming increasingly important as a tool to balance gas supply and demand over different periods in the european liberalized market context a monopolist unbundled network operator offers regulated transport services and flexibility balancing services according to the network code and balancing rules therefore gas policy makers should understand the role and consequences of line pack regulation the analysis shows that the line pack flexibility service has an important economic value for the shippers and the tso furthermore the analysis identifies distorting effects in the gas market due to inadequate regulation of line pack flexibility by disregarding the sunk costs of flexibility in the balancing rules the overall efficiency of the gas system is decreased finally the analysis demonstrates that the actual costs of line pack flexibility are related to the peak cumulative imbalance throughout the balancing period any price for pipeline flexibility should therefore be based on the related trade off between the right to use the line pack flexibility and the provision of transport services

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

international gas pricing in europe and asia a crisis of fundamentals abstract in continental europe and lng importing asia international gas prices reflect the market fundamentals of the 1970s 1990s when gas was replacing oil products and crude oil in energy balances by the end of the 2000s fundamentals in both these regions had changed significantly but gas price formation mechanisms had not this created major problems for buyers locked into long term contracts indexed to crude oil and oil product prices which had risen to levels far above gas market fundamentals by 2013 the transition to hub based pricing was well advanced in europe and dominant in the large markets in the north west of the continent in asia the crisis of fundamentals was only just starting to be addressed with a transition to market pricing an urgent imperative but still a distant prospect

mitigating contractual hazards unilateral options and contract length in this article we consider the ways in which the desire for efficient low cost adaptation to change influences the tradeoff between the design and duration of long term contractual relationships we examine the distortions in contract terms occasioned by nonprice competition for natural gas in the presence of wellhead price regulation deviations from optimal contract incentives significantly raise the cost of being bound to long term agreements and shorten the duration of contracts the approach we adopt suggests a method for empirically assessing the efficiency of alternative contracting practices and legal standards

is china s natural gas market globally connected abstract the rise of the shale gas industry and the need for clean low carbon energy transformation in china has meant that the relationship between domestic and foreign natural gas markets has become closer therefore identifying the changing relationships between the major global natural gas markets and china s natural gas market has important practical value for the current chinese domestic natural gas pricing system this paper used the dcc garch nardl ardl ecm as the analytical framework to study these relationships from which it was found that there was no unified global natural gas market and that china s natural gas market was not yet aligned with this market it was shown that there was no significant asymmetry in the impact of international gas prices on china s gas prices as no flexible adjustment measures were found in china s imported natural gas pricing mechanism moreover while international natural gas prices were found to have a significant impact on china s natural gas prices over the long term there were obvious regional differences over the short term accordingly new pricing policies should be designed to promote market oriented natural gas pricing reforms in acknowledging features such as asymmetry the difference between imported gas sources and the periodicity of price adjustment

privatization political risk and stock market development in emerging economies this paper investigates whether privatization in emerging economies has a significant indirect effect on local stock market development through the resolution of political risk we argue that a sustained privatization program represents a major political test that gradually resolves uncertainty over political commitment to a market oriented policy as well as to regulatory and private property rights we present evidence suggesting that progress in privatization is indeed correlated with improvements in perceived political risk our analysis further shows that changes in political risk in general tend to have a strong effect on local stock market development and excess returns in emerging economies we conclude that the resolution of political risk resulting from successful privatization has been an important source for the rapid growth of stock markets in emerging economies

oil price shocks and chinese banking performance do country risks matter abstract this paper contributes to the existing literature by investigating the impacts of oil prices on bank performance through a broad array of camel capital adequacy asset quality management earnings and liquidity indicators in china over the period 2000 2014 to gain further insights into this issue we also discuss whether the correlations change with different dimensions of country risk i e economic financial and political which extant studies ignored the results reveal that oil prices have a significant impact on banking performance as their increase triggers a reduction in banking performance in terms of capitalization management efficiency earning power and liquidity however these adverse effects are mitigated by country stability especially economic stability and political stability these results are important for policy makers who should be cautious when formulating a strategy for macroeconomic stability from the managerial perspective bank managers should consider establishing early warning and response mechanisms on the back of oil price shocks in order to operate under better performance

commodity convenience yield and risk premium determination the case of the u s natural gas market this paper contributes to the understanding of commodity pricing issues by measuring and modeling two of the most important concepts in the storable commodity markets the convenience yield and risk premium an emphasis is placed on the empirical determination of these factors in the u s natural gas market we find that the convenience yield and risk premium are measurable and economically significant while we find that the determination of the convenience yield is largely consistent with economic theories the evidence regarding the determination of the risk premium is mixed

convergence in energy consumption per capita among asean countries abstract we test for convergence in energy consumption per capita among asean countries over the period 1971 to 2011 using the panel kpss stationarity test and panel lagrange multiplier lm unit root test the results for the panel stationarity and unit root tests with structural breaks find support for energy convergence in asean

real option valuation of free destination in long term liquefied natural gas supplies this paper presents a real option model for the valuation of destination flexibility in long term lng supplies stochastic price dynamics in the different markets is modelled through geometric brownian motion processes mean reversion is considered as well as correlation between markets but instead of the usual correlation in return shocks a price convergence term is introduced representing the arbitrage streams between markets model parameters are estimated from market data on lng prices by maximum log likelihood the goodness of the fit for the proposed model is tested as well as for two alternative models confidence intervals for the parameters are given results for the model are calculated by monte carlo simulation frequency distributions for the main results are plotted the effect of the main parameters of the model is studied i e price volatilities price convergence initial prices in the markets mean reversion extra transportation costs number of alternative markets the value of destination flexibility is found to be an important share of the value of lng

financialization fundamentals and the time varying determinants of us natural gas prices abstract increasing empirical evidence shows that natural gas prices have decoupled from oil prices yet there remains an open question as to what are the determining factors of natural gas prices following the demise of oil indexation this paper aims to address this question using a dynamic model averaging dma approach dma can help identify key important price determinants and importantly does so within a time varying framework allowing us to document how the set of determinants has evolved in response to key market changes using time series data between 2001 and 2018 we demonstrate a clear declining role of oil prices in the natural gas pricing mechanism verifying the demise of indexation market or fundamental factors such as weather demand and supply conditions have at the same time become more important in addition our results illustrate an increasing role from financial markets captured by speculation related variables providing empirical evidence to support the recent literature on commodity market financialization the rising impact of speculation to natural gas prices introduces questions over how to balance market efficiency and risk management in the post indexation regime

the impact of the shale gas revolution on the u s and japanese natural gas markets we investigated whether the increase in the us shale gas production changed the structures of the us and japanese natural gas markets using market data for the period 2002 5 2012 5 our analysis consists of a structural break test and market integration analysis the bai and perron structural break test detected a break point of natural gas prices and consumption in 2005 as well as other external shocks hurricane katrina and the lehman shock that are irrelevant to shale gas development we eliminated the impact of these shocks by separating the data set using the breaks identified in our analysis we found the breaks skewed the estimation a market linkage existed between the us and japanese markets in the original data set while it did not in the separated data the vector autoregressive var model also indicated a significant change before and after the break point the us market had a one side influence on the japanese market before 2005 but the influence disappeared after 2005 our results implied that the shale gas revolution triggered by the increase in shale gas production in 2005 caused the change in the relationship between the us and japanese natural gas markets

do political factors affect stock returns during presidential elections abstract this study investigates whether or not political factors such as government policy and political connections affected stock returns during the 2008 taiwanese presidential election we find that firms that benefitted from were threatened by the proposed three links policy of the winning party experienced positive negative stock returns during the election we use the sensitivities of firms returns to bilateral trade flows between taiwan and china to measure the government policy effect our results show that the effects of political connections weakly exist but they become more significant when the support ratio of the winning party increased in polling data we also find that only the government policy effect holds for different crash risk and corporate governance levels finally investment strategies based on both political factors can generate positive abnormal returns with respect to the fama french three factor model

why did the price of solar pv si feedstock fluctuate so wildly in 2004 2009 abstract great attention has been paid to the origin of observed wild price fluctuations of solar pv si feedstock in both contract and spot markets during 2004 2009 this paper sheds light on this issue and tries to resolve it by addressing the following questions what kind of structural shock is underlying the price fluctuations of pv si feedstock how can we quantify the magnitude timing and relative importance of these shocks what are their dynamic effects on the real price of pv si feedstock by carefully studying development conditions the structural decomposition of the real price of pv si feedstock is proposed exchange rate shocks production cost shocks aggregate demand shocks and demand shocks specific to feedstock markets with a structural vector autoregression model the paper quantifies and verifies the impact of structural shocks on pv si feedstock real price changes based on national data an analysis is further taken to confirm the essential role of demand shocks specific to feedstock markets in determining sharper price fluctuations during 2004 2009 the results of this study have important implications for national solar pv development which can be better promoted and administrated if structural shocks in feedstock markets can be carefully evaluated and understood

how democracy affects growth abstract this paper introduces a new methodology to examine the empirical relationship between democracy and economic growth democratic institutions are assumed to affect growth through a series of channels we specify and estimate a full system of equations determining growth and the channel variables results suggest that democracy fosters growth by improving the accumulation of human capital and less robustly by lowering income inequality on the other hand democracy hinders growth by reducing the rate of physical capital accumulation and less robustly by raising the ratio of government consumption to gdp once all of these indirect effects are accounted for the overall effect of democracy on economic growth is moderately negative our results indicate that democratic institutions are responsive to the demands of the poor by expanding access to education and lowering income inequality but do so at the expense of physical capital accumulation

natural gas prices lng transport costs and the dynamics of lng imports according to the u s energy information administration lng is projected to become a much larger share of u s natural gas consumption rising from current levels of around 2 5 of total natural gas consumption to 12 4 by 2030 because natural gas and lng are substitutes natural gas prices are expected to be an important determinant of lng imports furthermore an increasing share of lng is traded under short term contracts with spot shipments being diverted to markets offering the highest returns netbacks relative natural gas prices as well as lng transportation costs are important determinants of lng netbacks this paper examines the empirical relationship between u s lng imports the henry hub price of natural gas relative to u k and asia gas prices and a proxy for lng transportation costs using monthly data from 1997 to 2007 granger causality tests error variance decomposition and impulse response analyses using a var model are employed to establish granger causality as well as the dynamics of natural gas prices and lng transportation innovations on lng imports

determinants of democracy a panel study of over 100 countries from 1960 to 1995 finds that improvements in the standard of living predict increase in democracy as measured by a subjective indicator of electoral rights the propensity for democracy rises with per capita gdp primary schooling and a smaller gap between male and female primary attainment for a given standard of living democaracy tends to fall with urbnization and with a greater reliance on natrual resources democracy has little relation to country size but rises with the middle class share of income the apparently strong relation of democracy to colonial heritage mostly disappears when the economic variables are held constant similarly the allowance for these economic variables weakens the interplay between democracy and religious affiliation however negative effects from muslim and non religious affiliations remain intact

a compound option model of production and intermediate inventories this article extends the option approach to valuing real assets by modeling the firm as a two stage process with bounded output rates in which the output of the first stage may be held as work in process in this setting the real asset becomes a compound option which if exercised gives the option to finish the work in process and sell the output as its final payoff the existence of intermediate inventories may arise as an optimal investment strategy for exploiting possible future price increases the framework allows us to analyze the effect of uncertainty on output rates and the effect of interest rates changes on inventory levels copyright 1993 by university of chicago press

corruption and democracy abstract most models and empirical tests of the relationship between corruption and democracy assume corruption falls as democracy matures yet recent theoretical developments and case evidence suggest an inverted u relationship between the two although so far no one has tested for this relationship by drawing on a panel data set covering a large number of countries between 1982 1997 substantial empirical support is found for an inverted u relationship between the durability age of democracy and corruption fortunately the turning point in corruption occurs rather early in the life of new democracies between 10 12 years

effect of qatar diplomatic and economic isolation on qatar stock market volatility an event study approach in this study we assess the impact of the political and economic blockade of qatar as well as four other events related to the blockade on qatar s stock market volatility one of these events occu

international market integration for natural gas a cointegration analysis of prices in europe north america and japan this paper investigates the degree of integration of natural gas markets in europe north america and japan in the time period between the early 1990s and 2004 the relationship between international gas market prices and their relation to the oil price are explored through principal components analysis and johansen likelihood based cointegration procedure both of them show a high level of natural gas market integration within europe between the european and japanese markets as well as within the north american market at the same time the obtained results suggest that the european respectively japanese and the north american markets were not integrated

sociotechnical constituencies game theory and the diffusion of compact discs an inter disciplinary investigation into the market for recorded music abstract this article was motivated by the inquiry of the national heritage committee of the british house of commons into the price of compact discs in 1993 its general thrust is to foster the dialogue between sociological approaches to the study of innovation and microeconomic theory to do this it presents a comprehensive case study of technological innovation in the market for recorded music in britain the material is analysed with the aid of the sociotechnical constituencies approach recently proposed in this journal by alfonso molina followed by a game theoretical analysis of competitive alignment between the dominant constituents using this interdisciplinary approach the article argues that technological innovation may induce price rigidities by allowing the establishment of focal points for tacit collusion the innovation of compact discs enabled the major record companies to redefine the overall price level to their advantage after the industry had undergone a period of profit squeezing price competition this has the important policy implication that radical product innovation may call for regulative changes in the techno institutional structure of the market

mean reversion in equilibrium asset prices evidence from the futures term structure we use the term structure of futures prices to test whether investors anticipate mean reversion in spot asset prices the empirical results indicate mean reversion in each market we examine for agricultural commodities and crude oil the magnitude of the estimated mean reversion is large for example point estimates indicate that 44 percent of a typical spot oil price shock is expected to be reversed over the subsequent eight months for metals the degree of mean reversion is substantially less but still statistically significant we detect only weak evidence of mean reversion in financial asset prices in this study we provide evidence of mean reversion in the prices of several real and financial assets rather than examining evidence of ex post reversion using time series of asset prices we use price data from futures contracts with varying delivery horizons to test whether investors expect asset prices to revert this approach offers two advantages first since futures prices are readily available for many markets our procedure can be implemented for many assets including those for which reliable spot price data is elusive second there is little ambiguity as to the source of any mean reversion detected using our method subject only to the maintained assumption that the no arbitrage cost of carry condition holds our test detects mean reversion that is expected to occur in equilibrium but has no power to detect mean reversion resulting from noise or inefficiencies our methodology focuses on relations between price levels and the slope of the futures term structure defined as the change across delivery dates in the futures prices observed on a given trading date an inverse relation between prices and the futures term slope constitutes evidence that investors expect mean reversion in spot prices to illustrate initially assume there are no

natural gas in asia trade markets and regional institutions natural gas trade in asia has been dominated by long established market structures under which liquefied natural gas lng has remained indexed based on the price of crude oil high transaction costs in the region in recent years imply that the regional market is sub optimally organized since 2010 the continued prevalence of oil indexation has had the most adverse effect on japan the world s largest lng importer in response japan implemented several strategies to challenge traditional lng pricing mechanisms in the region and ultimately reduce transaction costs japan s efforts include an increase in the share of spot and short term purchases sourcing new supplies from the united states under alternative pricing arrangements and driving regional buyer cooperation this paper evaluates the potential effect of japan s lng strategy on regional pricing in the broader institutional context arguing that lng pricing in the region will only partially shift away from oil indexation by the end of the decade while recent cooperation among regional lng importers indicates that there may be scope for change in the regional institutional setting the degree of cooperation is insufficient to have a profound effect on regional pricing

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

democracy foreign direct investment and natural resources abstract empirical studies that examine the impact of democracy on foreign direct investment fdi assume that the relationship between democracy and fdi is the same for resource exporting and non resource exporting countries this paper examines whether natural resources in host countries alter this relationship we estimate a linear dynamic panel data model using data from 112 developing countries over the period 1982 2007 we find that democracy promotes fdi if and only if the value of the share of minerals and oil in total exports is less than some critical value we identify 90 countries where an expansion of democracy may enhance fdi and 22 countries where an increase in democratization may reduce fdi we also find that the effect of democracy on fdi depends on the size and not the type of natural resources

regulation and long term contracting in us natural gas markets this paper addresses the recent experience of the us natural gas industry with contracting and regulation the so called contracts problem between producers and pipelines we develop a simple model of contracting between a single buyer and seller emphasizing the determination of price and minimum purchase take or pay provisions we find that take or pay provisions are likely to emerge in regulated and unregulated markets characterized by uncertainty but that phased deregulation may well exacerbate the problem of contract adjustment our model is supported by empirical evidence drawn from recent samples of contracts between wellhead producers and pipelines

forum shopping for ex post gas balancing services the patchwork of different imbalance settlement rules in geographically adjacent gas regions induces shippers to go forum shopping to minimize costs of ex post balancing services this shopping increases efficiency and thus welfare of the shippers on the one hand the impact on net efficiency is dependent on the relative incentives provided by different balancing mechanisms and the relative system balancing costs that the transmission system operators face to offer balancing services to unbalanced shippers on the other hand if the gas balancing mechanism and the system balancing costs are aligned net efficiency in the combined gas system will rise our results demonstrate that such an outcome is not guaranteed hence market integration without properly checking compatibility of balancing rules can improve shipper efficiency at the cost of reducing overall efficiency the latter outcome should clearly be avoided by policy makers and european regulators whose primary concern should be overall efficiency as this provides fair and efficient prices for gas consumers and a higher utility for society

what drives natural gas prices in the united states a directed acyclic graph approach abstract this study investigates the impacts of driving factors for natural gas prices during the period from 1999 to 2017 a data driven approach namely the directed acyclic graph dag is first employed to disclose the contemporaneous relations among natural gas crude oil and various factors the main results indicate that there is a stable contemporaneous causal flow from crude oil to natural gas unlike most of the previous research we found a long term equilibrium relationship between crude oil and natural gas returns when additional factors were taken into account however the impact of oil price returns on natural gas price volatility has decreased after the 2008 global financial crisis finally storage and seasonality factors can never be ignored when analysing natural gas prices while the impact of speculative activity on natural gas volatility is relatively weak

pricing the european option to switch between two energy sources an application to crude oil and natural gas we consider a firm which can choose between crude oil and natural gas to run its business the firm selects the energy source which minimizes its energy or production costs at a given time horizon assuming the energy strategy to be established over a fixed time window the energy choice decision will be made at a given future date t in this light the firm s energy cost can be considered as a long position in a risk free bond by an amount of the terminal oil price and a short position in a european put option to switch from oil to gas by an amount of the terminal oil price too as a result the option to switch from crude oil to natural gas allows for establishing a hedging strategy with respect to energy costs modeling stochastically the underlying asset of the european put we propose a valuation formula of the option to switch and calibrate the pricing formula to empirical data on a daily basis hence our innovative framework handles widely the hedge against the price increase of any given energy source versus the price of another competing energy source i e minimizing energy costs moreover we provide a price for the cost reducing effect of the capability to switch from one energy source to another one i e hedging energy price risk

income and democracy existing studies establish a strong cross country correlation between income and democracy but do not control for factors that simultaneously affect both variables we show that controlling for such factors by including country fixed effects removes the statistical association between income per capita and vari ous measures of democracy we present instrumental variables estimates that also show no causal effect of income on democracy the cross country corre lation between income and democracy reflects a positive correlation between changes in income and democracy over the past 500 years this pattern is con sistent with the idea that societies embarked on divergent political economic development paths at certain critical junctures jel d7 e 1

gas and lng trading hubs hub indexation and destination flexibility in east asia abstract in the east asian gas markets issues like gas trading hubs hub indexed pricing and destination flexibility are being debated this paper examines the impact of a change in east asia s pricing benchmark and contract flexibility on the regional and global gas markets the paper uses the nexant world gas model a linear program with global cost minimization as the objective to our knowledge this study on hub competition price benchmark change and contract flexibility improvement in east asia will be the first in the literature and have real policy relevance the results show that both price benchmark change and contract flexibility improvements will create an overall benefit for the world and east asia importers but the impacts are different among exporters and importers however there is no evidence of competition among different benchmark hubs and no evidence that destination restrictions cause the asia premium it implies that removal of destination clauses has higher priority than the change to hub indexation for japan korea and chinese taipei but both should be treated equally in china the study also suggests that east asian importers should cooperate among themselves and with exporters to facilitate the hub creation and contract changes in east asia

two markets and a weak link abstract we characterise the relationship between two network based oligopoly markets when local players share the interconnection s ownership to that purpose we analyse the case of the bacton uk zeebrugge belgium natural gas pipeline using vector auto regressive representation techniques we conclude that there is a threshold of capacity deployment after which the two local markets split as a result the relationship between local price differentials and capacity utilisation is increasing and convex we also show that the local prices dynamic structure is characterised by convergence features