what has driven oil prices since 2000 a structural change perspective abstract this paper characterizes weekly international oil price fundamentals since 2000 by analyzing the transformation of the market mechanism based on structural change perspective using endogenously determined break tests that allow for changes in both level and trend we divide the price fluctuations in the international oil market after 2000 into three stages relatively calm market period january 07 2000 to march 12 2004 the bubble accumulation period march 19 2004 to june 06 2008 and the global economic crisis period june 13 2008 to september 11 2009 the results show the existence of structural breaks refutes the utility of investigation of the full sample period as a whole and in different structural periods the main drivers of oil price changes and their way of influence and degree are significantly distinct then we demonstrate the evolving process of market mechanism since 2000 through establishing comparative models we also quantitatively measure the roles of speculation and episodic events in oil price fluctuations

moments based spillovers across gold and oil markets abstract in this paper we use intraday futures market data on gold and oil to compute returns realized volatility volatility jumps realized skewness and realized kurtosis using these daily metrics associated with two markets over the period of december 2 1997 to may 26 2017 we conduct linear nonparametric and time varying rolling tests of causality with the latter two approaches motivated due to the existence of nonlinearity and structural breaks while there is hardly any evidence of spillovers between the returns of these two markets strong evidence of bidirectional causality is detected for realized volatility which seems to be resulting from volatility jumps evidence of spillovers are also detected for the crash risk variables i e realized skewness and for realized kurtosis as well with the effect on the latter being relatively stronger based on a moments based test of causality evidence of co volatility is deduced whereby we find that extreme positive and negative returns of gold and oil tend to drive the volatilities in these markets in our robustness check we identify a causal chain in the realized volatility from oil to gold via the financial stress our results have important implications for not only investors but also policymakers

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

trade reforms credibility and development abstract this paper analyzes the implications of uncertainty regarding the future course of trade liberalization on investment and policies uncertainty concerning the future tariff rate is shown to depress saving and to operate as a subsidy tax on inward outward investment we identify the need to tax subsidize private investment in the importable exportable sector the elimination of sectorial private investment policies calls for a rise drop in the public private capital ratio in the outward oriented inward oriented activities in the presence of an external credit ceiling a higher degree of risk aversion increases the magnitude without changing the nature of the policies

the north american horticultural industry and the risk of plant invasion we develop a monopolistic competition model of the horticultural industry and estimate the resulting profit function with u s and canadian industry data combining the results with a hazard analysis of the characteristics of exotic plants introduced in north america we explore optimal tax simulations for internalizing the risk and costs of a potential plant invasion if the share of the exotic plant sales in final profits is large then the resulting annual fee will be high discouraging the expansion of the nursery industry however the annual revenues could fund efforts to mitigate the damages resulting from any accidental plant invasion

one security many markets determining the contributions to price discovery when homogeneous or closely linked securities trade in multiple markets it is often of interest to determine where price discovery the incorporation of new information occurs this article suggests an econometric approach based on an implicit unobservable efficient price common to all markets the information share associated with a particular market is defined as the proportional contribution of that market s innovations to the innovation in the common efficient price applied to quotes for the thirty dow stocks the technique suggests that the preponderance of the price discovery takes place at the new york stock exchange nyse a median 92 7 percent information share although most of the classic paradigms in market microstructure concern a security that trades in a single centralized market such situations are becoming increasingly rare in practice fragmentation the dispersal of trading in a security to multiple sites has emerged as a dominant institutional trend this process is of concern to financial economists and regulators because price information and price discovery the impounding of new information into the security price arguably the most important products of a security market have many attributes of public goods as the process of fragmentation accelerates it may be important to determine where the price information and price discovery are being produced 1 this paper suggests a practical econometric approach to this problem the technique is illustrated with an application to u s equity markets many stocks listed on the new york stock exchange nyse trade concurrently on the regional exchanges and the national association of securities dealers national market system nasd nms since a share of ibm stock is the same security whether purchased on the midwest or pacific exchange this is a particularly clear instance of multiple markets nevertheless the expres

on the efficiency of futures markets another view abstract one definition of market efficiency holds that today s price of an item contains all the price information that there is about that item that is today s price contains information about people s expectations about the future however in estimating price equations analysts almost exclusively look to the past in developing price forecasting models this paper examines the question how do futures prices affect today s price for heating oil that is do futures markets add to the efficiency of markets by conveying information from the future to the present

speculation and the 2008 oil bubble the dcot report analysis abstract this article analyzes the cftc s disaggregated commitments of traders dcot report to get more insights into the behavior of different traders during the 2008 oil bubble the analysis shows that 1 the money manager category perfectly played the oil bubble got in early and started selling shortly before the bubble peak 2 the producer merchant processor user category and the nonreportable category were covering their short positions into the peak of the bubble 3 the swap dealer category benefited while the price of oil was rising but incurred heavy losses as the price of oil collapsed 4 we find no indications of speculation by any group of traders via the positive feedback trading or rational destabilization and 5 we do however criticize the commercial hedgers for failing to arbitrage the soaring oil prices in 2008

a comparison of petroleum futures versus spot prices as predictors of prices in the future abstract even though studies have indicated that the futures market leads the spot market in price discovery this paper hypothesizes that the predictive significance of each should be the same a number of different statistical tests are presented to test this hypothesis when deseasonalized data is employed the predictive significance of each series is found to be the same but when actual prices are employed futures prices did correctly anticipate the observed seasonal pattern

protectionism trade and measures of damage from exotic species introductions unintentional introductions of nonindigenous plants animals and microbes cause significant ecological and agricultural crop damage worldwide trade in both manufactured and agricultural goods is a primary vector for such introductions fusing simple models of trade and biological introductions we explore the links between trade protectionism and damage arising from exotic species introductions we show that it is possible for freer trade to reduce damage arising from exotic species invasions we also show how current measures of damage heavily weighted toward agricultural damage serve as misleading indicators of how restrictions to trade affect total losses arising from exotic species

price movements and price discovery in futures and cash markets r isk transfer and price discovery are two of the major contributions of futures markets to the organization of economic activity working 1962 evans 1978 p 80 and silber 1981 risk transfer refers to hedgers using futures contracts to shift price risk to others price discovery refers to the use of futures prices for pricing cash market transactions working 1948 wiese 1978 p 87 and lake 1978 p 161 the significance of both contributions depends upon a close relationship between the prices of futures contracts and cash commodities this paper examines the characteristics of price movements in cash or spot markets and futures markets for storable commodities section ii presents an analytical model of simultaneous price dynamics which suggests that over short intervals of time the correlation of price changes is a function of the elasticity of arbitrage between the physical commodity and its counterpart futures contract greater elasticity fosters more highly correlated price changes and thereby facilitates the risk transfer function the elasticity of supply of arbitrage services is constrained by among other things storage and transaction costs thus futures contracts will not in general provide perfect risk transfer facilities over short time horizons the essence of the price discovery function of futures markets hinges on whether new information is reflected first in changed futures prices or in changed cash prices hoffman 1932 pp 258259 the model in section ii provides a framework for analyzing whether one market is dominant in terms of information flows and price discovery in section iii we develop a model based on section ii which is appropriate for estimating the lead lag relationship between cash prices and futures prices section iv presents empirical estimates of the parameters of the model for seven different storable commodities wheat corn oats frozen orange juice concentrates copper gold and silver the cost of arbitrage between cash and futures differs across these commodities for this reason we are not surprised to find inter commodity differences in the correlation of short run price changes and in the substitutability of futures contracts for cash market positions with respect to the price discovery function of futures markets we find that while futures markets dominate cash markets cash prices do not merely echo futures prices there are reverse information flows from cash markets to futures markets as well

a weak form evaluation of the efficiency of the rotterdam and italian oil spot markets abstract we examine whether the efficient market hypothesis can be applied to the rotterdam and italian oil markets by analysing the log price changes observed in those markets for monthly data during the period january 1980 to december 1987 the objective is to investigate the leptokurticity in observed distributions of low price changes the stable paretian distributions have been used to test the leptokurtic distributions

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

effects of nymex trading on ipe brent crude futures markets a duration analysis abstract recent developments in the energy markets and the surge and dip in crude oil prices over the last few years have renewed the interest in the workings of the two main price setting markets london s international petroleum exchange ipe and new york s mercantile exchange nymex the interaction of these two markets when both of them are open synchronous trading and when only london is open asynchronous trading is important in view of the fact that most participants take positions in both markets this paper looks at how london is affected by new york by analysing the transaction duration of the ipe brent futures contract both when the nymex wti futures contract is being traded and when nymex is closed using tick by tick data obtained from ipe transaction durations are found to form two distinctive and inverted u shaped patterns autoregressive conditional duration acd model first introduced by engle and russell is applied to the data parameters of ipe morning and afternoon are significantly different from each other underlining the dominant effects of nymex on ipe trading the results from the current analysis reinforce previous results by the authors which indicate that nymex is a leading price setter in crude oil futures prices and has a dominant effect on the ipe traded contracts

does opec influence crude oil prices testing for co movements and causality between regional crude oil prices using high frequency data the co movements among crude oil prices are analysed in order to address the question of regionalization of the world crude oil market time series econometrics in the form of error correction modelling is applied for daily crude oil price data covering the time period 1988 to 2004 and in this framework topics like weak and strong exogeneity among three major oil prices represented by brent opec and texas wti are addressed the empirical results are that causality is most likely bi directional among these crude oil prices and hence rejecting a regionalization hypothesis of the global oil market and also an influence from the opec oil price towards bent and wti which are usually claimed to have a benchmark role

oil prices the role of refinery utilization futures markets and non linearities we test the hypothesis that real oil prices are determined in part by refinery capacity non linearities in supply conditions and or expectations and that observed changes in these variables can account for the rise in prices between 2004 and 2006 results indicate that the refining sector plays an important role in the recent price increase but not in the way described by many analysts the relationship is negative such that higher refinery utilization rates reduce crude oil prices this effect is associated with shifts in the production of heavy and light grades of crude oil and price spreads between them non linear relationships between opec capacity and oil prices as well as conditions on the futures markets also account for changes in real oil prices together these factors allow the model to generate a one step ahead out of sample forecast that performs as well as forecasts implied by far month contracts on the new york mercantile exchange and is able to account for much of the 27 rise in crude oil prices between 2004 and 2006

an analysis of price discovery between bitcoin futures and spot markets abstract this paper analyzes the bitcoin price discovery process we collect data on futures and spot prices for the period december 2017 to may 2018 and compute hasbrouck s information share and gonzalo and granger s common factor component to quantify the contribution of each market to the price discovery process both measures coincide in suggesting that the bitcoin futures market dominates the price discovery process we also find that both prices are driven by a common factor that is given by a weighted combination of the futures and spot market finally we observe that deviations from the equilibrium condition equating the futures and spot log price have predictive ability for the return on the bitcoin spot price but not on the futures price

dynamic sanitary and phytosanitary trade policy this paper characterizes the optimal use of sanitary and phytosanitary standards to prevent the introduction of harmful pests and diseases through international trade because established pest and disease infestations grow and spread over time their introduction has intertemporal consequences in a dynamic economic model an efficient trade policy balances the costs of sps measures against the discounted stream of the costs of control and social damages that are avoided by using sps measures where future growth of any established infestation is accounted for we examine when phytosanitary trade policy makes good economic sense when it is efficient to provide full protection against pests and diseases and when restrictive but not fully protective trade policy is efficient

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

market information and price volatility in petroleum derivatives spot and futures markets some new york evidence abstract this paper examines the relationship between petroleum futures trading market information and spot prices it tests the hypothesis that there is increased spot market information with futures trading of various petroleum derivatives for weekly data during the period january 1970 to july 1985 at the new york mercantile exchange increased market information with futures trading is indicated by the insignificance of coefficients of past prices in spot price regressions in periods with futures trading however the estimates of the coefficient of variation indicate that price volatility tends to increase with futures trading thus traders seem better informed with futures trading although the advantages of increased market information might potentially be undermined by increased price volatility as in the case of regular gasoline

have commodities become a financial asset evidence from ten years of financialization the financialization of commodity markets over the last decade has changed the behavior of commodity prices in fundamental ways in this paper we uncover the gradual transformation of commodities from a physical to a financial asset although economic demand and supply factors continue to play an important role recent indicators associated with financialization have emerged since 2008 we show that financial variables have become the main driving factors explaining the variation in commodity returns and volatility today our findings have important implications for portfolio analysis and for the effectiveness of hedging in commodity markets

avoiding invasives trade related policies for controlling unintentional exotic species introductions abstract international commodity trade serves as the primary conduit for unintentional introductions of damaging exotic species we use a simple model of contaminated goods trade to analyze the optimal mix of tariffs and inspections as means of controlling damage from this negative externality among other policy relevant results we find that 1 while it is always optimal to employ tariffs there are non trivial cases in which inspections should optimally be set to zero 2 a higher infection rate requires a higher tariff but beyond a point optimal inspections decrease in the infection rate and finally 3 taking a dynamic view and considering future effects of current introductions leads unambiguously to more stringent inspections but may give rise to higher or lower tariffs

the role of trader positions in spot and futures prices for wti abstract we extend the analysis of causal relations between trader positions and oil prices and the process of price discovery by estimating a cointegrating vector autoregression cvar model that expands the cash and carry relation between spot and futures prices to quantify long and short run relations among oil prices trader positions interest rates and oil inventories results indicate that oil inventories and trader positions are needed to generate cointegration between spot and futures prices the presence of trader positions and oil inventories suggest that both play a role in price discovery furthermore the cointegrating relation for price loads into the equation for both oil prices and trader positions this suggests a bi directional simultaneous adjustment process between oil prices and trader positions this expands the unidirectional causal relation from oil prices to trader positions that is generated by previous studies additional results suggest that price discovery occurs in the market for heavily traded near month futures contracts but discovery for thin far month futures markets occurs in the spot market together these results suggest mechanisms by which speculation could affect oil prices but the results presented here are moot regarding their effects

risk perception in psychology and economics abstract the concept of rationality has been basic to most economic analysis its content has been successively refined over the generations as applied to the static world of certainty it has turned out to be a weak hypothesis not easily refuted and therefore not very useful as an explanation though not literally a tautology but recent decades have seen the development of stronger versions applied to a world in which time and uncertainty are real among its most important manifestations have been criteria for consistency in allocation over time the expected utility hypothesis of behavior under uncertainty and what may be termed the bayesian hypothesis for learning that is the consistent use of conditional probabilities for changing beliefs on the basis of new information these hypotheses have been used widely in offering explanations of empirically observed behavior though as not infrequently in economics the theoretical development has gone much further than the empirical implementation these hypotheses have also been used increasingly in normative analysis as a component of benefit cost studies therefore frequently referred to as benefit risk studies the value of reducing mortality rates from diseases for example has been studied by assuming that choice of occupations is made inter alia by comparing wage differences with mortality differences

speculative bubbles in recent oil price dynamics evidence from a bayesian markov switching state space approach abstract motivated by repeated spikes and crashes during previous decades we investigate whether the heavily financialized market for crude oil has been driven by speculative bubbles in our theoretical modeling we draw on the convenience yield approach in order to approximate the fundamental value of the oil price we separate the oil price fundamental from the bubble component by expressing a standard present value oil price model in state space form we then introduce two markov regimes into the state space representation in order to distinguish between two distinct phases in the bubble process namely one in which the oil price bubble is a stable process and one in which the bubble explodes we estimate the entire markov switching state space specification using an econometrically robust bayesian markov chain monte carlo mcmc methodology based on inferential techniques designed for statistically separating both markov regimes in the bubble process from each other we find robust evidence for the existence of speculative bubbles in recent oil price dynamics

price discovery in energy markets abstract in this study we empirically analyze the price discovery process in the futures and spot markets for crude oil heating oil and natural gas using daily closing prices we use two different information share measures that are based on the methods proposed by gonzalo and granger 1995 and lien and shrestha 2014 both measures indicate that almost all the price discovery takes place in the futures markets for the heating oil and natural gas however for the crude oil the price discovery takes place both in the futures and spot markets as a whole our study indicates that futures markets play an important role in the price discovery process

the dynamics of a nonlinear relationship between crude oil spot and futures prices a multivariate threshold regression approach abstract this paper segments daily data from january of 1986 to april of 2007 into three periods based on certain important events both periods i and ii indicate that the spot prices in general are higher than futures prices as was well known in the literature only period iii 2001 9 11 2007 4 30 displays a reverse phenomenon futures prices in general exceed spot prices when the absolute value of a basis futures spot is greater than the threshold value in the arbitrage area regime 1 and 3 at least one of the error correction coefficients representing adjustment towards equilibrium is statistically significant that is there exists a tendency in the oil market in which prices move toward equilibrium with respect to the short run dynamic interaction between spot price change st and futures price change ft our results indicate that when the spot price is higher than futures price and the basis is less than certain threshold value regime 3 there exists at least one causal relationship between st and ft conversely when the futures price is higher than spot price and the basis is higher than certain threshold value regime 1 there exists at least one causal relationship between st and ft finally we use the method suggested by diebold and mariano diebold francis x mariano roberto s 1995 comparing predictive accuracy journal of business and economic statistics 13 3 253 263 to compare the predictive power between the linear and nonlinear models our empirical results indicate that the in sample prediction of the nonlinear model is clearly superior to that of the linear model

crack spread hedging accounting for time varying volatility spillovers in the energy futures markets crude oil heating oil and unleaded gasoline futures contracts are simultaneously analysed for their effectiveness in reducing price volatility for an energy trader a conceptual model is developed for a trader hedging the crack spread various hedge ratio estimation techniques are compared to a multivariate garch model that directly incorporates the time to maturity effect often found in futures markets modelling of the time variation in hedge ratios via the multivariate garch methodology and thus taking into account volatility spillovers between markets is shown to result in significant reductions in uncertainty even while accounting for trading costs copyright 2002 john wiley sons ltd

the transition of punjab agriculture a choice of technique approach the introduction of modern crop varieties in punjab india led to rapid income growth adoption rate and level of the new varieties is examined using a choice of technique approach in which techniques of production are identified by crop variety season of growth and method of production modeling the dynamic effects of technology resource availability and incentives reveals a consistent picture of the transition process the results show the importance of incentives and availability of quasi fixed inputs such as irrigation fertilizers and roads by the late 1970s the long run aggregate supply elasticity was between 1 3 1 5

explaining crude oil prices using fundamental measures abstract oil is the world s most important commodity and improving the understanding of drivers of its price is a longstanding research objective this article analyses real oil prices during 1984 2007 using a monthly dataset of fundamental and market parameters that cover financial markets global economic growth demand and supply of oil and geopolitical measures the innovation is to incorporate proxies for speculative and terrorist activity and dummies for major industry events and quantify price impacts of each new findings are positive links between oil prices and speculative activity bond yields an interaction term incorporating opec market share and oecd import dependence and the number of us troops and frequency of terrorist attacks in the middle east shocks also prove significant with a 6 18 per barrel impact on price for several months

does china factor matter an econometric analysis of international crude oil prices abstract whether china s crude oil imports are the culprit of oil price volatility these years has not been quantitatively confirmed therefore this paper empirically investigates the role of china s crude oil net imports in brent price changes from october 2005 to november 2013 based on an econometric analysis the results indicate that during the sample period china s crude oil imports do not significantly affect brent price changes no matter in the long run or short run therefore the blame for china s crude oil imports to cause the dramatic fluctuations of international oil price has no solid evidence also there exists significant uni directional causality running from the brent price to china s crude oil imports at the 5 level besides the response of the brent price to china s crude oil imports is found positive but slight and the brent price responds more significantly to us dollar exchange rate and oecd commercial inventory than to china s crude oil imports in the short run finally the contribution of china s crude oil imports to brent price movement is about 10 which is less than that of us dollar exchange rate but larger than that of indian crude oil imports or oecd commercial inventory

the response of u s natural gas futures and spot prices to storage change surprises fundamental information and the effect of escalating physical gas production abstract we study the behavior of u s natural gas futures and spot prices on and around the weekly announcements by the u s energy information administration of the amount of natural gas in storage we identify an inverse empirical relation between changes in futures prices and surprises in the change in natural gas in storage and that this relation is not driven by the absolute size of the surprise the evidence also indicates prices react first in the futures market for natural gas with that information then flowing to the spot market post 2005 corresponding to a period of significant increases in the production of natural gas in the united states the response of prices to storage surprises was larger in absolute value no evidence is found of economically meaningful reactions to the surprise other than on the date the storage news is released the results demonstrate the importance of fundamental information in the formation of natural gas prices

consumer behaviour theory and empirical evidence a survey this survey is designed to emphasize the relationship between empirical a nd theoretical considerations in the analysis of consumer behavior a lthough it focuses primarily on analysis at the individual or micro l evel it tries where possible to draw implications for the estimati on of aggregate relationships the importance of micro level analysis stems from the rapid expansion in available panel and survey data se ts this development has generated its own theoretical and empirical issues many of which are raised in this survey copyright 1988 by royal economic society

argentine agricultural policy in a multiple input multiple output framework argentine agricultural output grew at a rate of about 1 4 per year between 1940 and 1972 cavallo and mundlak p 13 which is a very sluggish growth rate given earlier rates of 1 8 for 1908 20 and 2 2 1920 40 schultz it also is sluggish relative to growth in u s agricultural output of 1 9 during the same period adjusting for factor use total factor productivity in argentine agriculture grew at a rate of only 0 6 during this period compared to 1 2 in the rest of the argentine economy cavallo and mundlak and compared to about 1 9 in u s agriculture usda a number of hypotheses have been offered to

does the s p500 index lead the crude oil dynamics a complexity based approach abstract taking the complex property of nonlinear feedback connectivity into consideration the goal of this paper is to apprehend the interdependences between the financial and energy sectors our contribution is both theoretical and methodological we conduct a multivariate analysis employing nonlinear tools namely the partial transfer entropy and the asymmetric mackey glass causality test in particular we build a system comprising the petroleum complex crude oil gasoline and heating oil the s p500 index and the 1 month futures spot spread for crude oil by adopting a rolling window approach we observe a persistent lead lag relationship between the s p500 index and the market participants expectations for crude oil from 2004 to 2009 depending on the bubble period in the stock market it appears that the resulting coupling becomes subject to the deterioration of global economic activity induced by large common shocks

investigation of production sales and inventory relationships using multicointegration and non symmetric error correction models the accumulated sum of a stationary series is called integrated if a linear combination of some of the integrated series is stationary it is said to be cointegrated this paper presents empirical results on inventories to consider the possibility of a deeper form of cointegration called multicointegration which is introduced in granger and lee 1989 a vector integrated series is multicointegrated if the accumulated sum of its stationary cointegrated linear combination is again cointegrated with itself inventory which is the accumulated sum of production minus sales is probably cointegrated with production and sales the empirical results generally support the presence of multicointegration of production and sales in many u s industries and industrial aggregates the results also favour the non symmetric error correction model providing evidence that the strength of attraction is different on both sides of the attractor a modified s s rule for inventory control is investigated in the context of a non symmetric error correction model and the results generally do not support the s s rule sufficient evidence is found to conclude that multicointegration is a useful concept in the area of inventory determination

on the costs of temporary policy abstract the effects and costs of a temporary trade liberalization experiment are studied in terms of a model with an infinitely lived individual under perfect capital mobility and no static gains from trade it is shown that the current account deteriorates during liberalization and becomes more negative the shorter is the liberalization period the costs are non monotonic with respect to the latter and timing of their maximum varies widely with parameters the analysis is extended to include durable and home goods money and static gains from trade

there is no silver bullet the value of diversification in planning invasive species surveillance abstract in this study we demonstrate how the notion of diversification can be used in broad scale resource allocation for surveillance of invasive species we consider the problem of short term surveillance for an invasive species in a geographical environment we find the optimal allocation of surveillance resources among multiple geographical subdivisions via application of a classical portfolio framework which allocates investments among multiple financial asset types with uncertain returns in a portfolio that maximizes the performance and by meeting the desired diversification targets protects against errors in estimating the portfolio s performance we illustrate the approach with a case study that applies a spatial transmission model to assess the risk of spread of the emerald ash borer eab a significant pest in north america with infested firewood that may be carried by visitors to campground facilities in central canada adding the diversification objective yields an expected survey performance that is comparable with undiversified optimal allocation but more importantly makes the geographical distribution of survey priorities less subject to possible errors in the spread rate estimates overall diversification of pest surveillance can be viewed as a viable short term strategy for hedging against uncertainty in expert and model based assessments of pest invasion risk

imitative innovation and international joint ventures a dynamic analysis abstract in this paper we deal with some dynamic issues of international joint venture in the context of a developing country we provide a rationale for international joint venture formation as well as its subsequent instability where instability is interpreted as payoff readjustments between the partners in the venture although the joint venture is formed in response to government restrictions on foreign equity holdings in the first period its subsequent instability is caused by both the change in government policy as well as the outcome of imitative technological innovation undertaken by the host partner it is also shown that uncertainty about the government policy in the second period plays an important role in the formation of joint venture in the first period

optimal border policies for invasive species under asymmetric information this paper analyzes the problem faced by a border protection agency if endogenous exporter abatement activities affect invasive species risk allowing for unobservable differences in abatement cost we show how the optimal inspection penalty regime differs from the symmetric information case departing from previous literature we allow for technical assistance a policy instrument specifically permitted and commonly employed under article 9 of the world trade organization sanitary and phytosanitary agreement we find the information asymmetry can make it optimal for the importing country to provide technical assistance grants for exporter risk abatement even if it would otherwise be inefficient further we show that fungibility of technical assistance with inputs in other sectors of the exporting economy affects the qualitative nature of optimal policy if technical assistance has no outside value in the exporter s country optimal policy is characterized by a menu of contracts balancing higher tariffs with lower penalties for being caught with an invasive if technical assistance can be used in other sectors of the exporter s economy it can introduce countervailing incentives making a uniform tariff penalty combination optimal

revisiting the relationship between spot and futures oil prices evidence from quantile cointegrating regression article i nfo since most real decisions depend upon current market states or whether it is advantageous to the participants themselves this paper revisits the relationship between spot and futures oil prices of west texas intermediate covering 1986 to 2009 with an innovative approach named quantile cointegration different to previous perspectives we target the issues of cointegrating relationships causalities and market efficiency based on different market states under different maturities of oil futures in our empirical analysis except for market efficiency long run cointegrating relationships and causalities between spot and futures oil prices have significant differentials among futures maturities and the performances of spot oil markets furthermore the response of spot prices to shocks in 1 month futures oil prices is much steeper in high spot prices than in low spot prices this phenomenon is consistent with the prospect theory kahneman and tversky 1979 in that the value function is generally steeper for losses than for gains

tariff escalation and invasive species damages we investigate the interface between trade and damages from invasive species is focusing on escalation in tariffs between raw input and processed good markets and its implication for is based damages the current tariff escalation in processed agro forestry products motivates our analysis tariff escalation exacerbates the likelihood of is introduction by biasing trade flows towards increased trade of primary commodity flows and against processed product trade we show that a reduction of tariff escalation by lowering the tariff on processed goods increases allocative efficiency and reduces is based damages a win win situation we also identify policy menus for trade reforms involving tariffs on both raw input and processed goods leading to win win situations

price discount inventories and the distortion of wti benchmark abstract applying a rolling estimation to the hasbrouck information share model this study investigates the changing status of wti benchmark over time results show the ability of wti in reflecting market conditions decreases sharply and wti s efficiency in processing information has been surpassed by brent s since the second half of 2004 in the short run the wti distortion is related to its price discount problem but the distortion cannot be indicated by contangos in the long run wti s price discount problem coexists with a positive forward curve and both have harmed the price discovery role of wti the rising inventories in cushing significantly deteriorate wti s ability in serving as a world benchmark

do emerging markets matter in the world oil pricing system evidence of imported crude by china and india abstract this paper provides empirical evidence on the changing structure of world oil price system by identifying an additional driver emerging market factor we choose china and india as a representative of emerging markets to examine if the quantity of crude oil imported by china and india is significant in the existing oil pricing system kaufmann et al 2004 our data starts from january 2002 and ends in march 2010 which includes the oil shock of 2007 2008 we utilize cointegration and error correction model framework developed by engle granger 1987 and gregory hansen 1996 in the analysis our results indicate that demand from emerging markets has become a significant factor in the world oil pricing system since 2003 this result is significant as it lends empirical support to the widely held conjecture that the oil shock of 2007 2008 is a demand led shock hamilton 2009 our result also has significant policy implications that go beyond the oil shock the emerging market factor is there to stay and reflects the changing power between emerging and developed economies in the world economic system as a result of decades of fast economic development in the former it will certainly influence policy issues related to oil and beyond

pure martingale and joint normality tests for energy futures contracts abstract in this study we empirically analyze to see if the pure martingale hypothesis holds for three energy related commodities crude oil heating oil and natural gas we also test this hypothesis for five different hedging horizons 1 day 1 week 4 week 8 week and 12 week our empirical results show that the pure martingale hypothesis holds for all three commodities and all five horizons this implies that the expected return on futures contract can be ignored in determining the optimal hedge ratio we also test to see if the joint normality between futures and spot returns holds for the same three commodities and five hedging horizons we reject the joint normality hypothesis for all three commodities and five hedging horizons this implies that hedgers with different utility function have different optimal hedge ratios thus in general one needs to take into account of hedger s utility function when deriving optimal hedge ratio our results are robust to pre and post financial crisis as well as some other specifications considered in the paper

credibility real interest rates and the optimal speed of trade liberalization abstract this paper investigates the effects of imperfectly credible trade liberalization programs on welfare and the allocation of resources we present a rational expectations model in which a government with limited access to international borrowing will abort a liberalization program if hard currency reserves are depleted too quickly the liberalization s lack of perfect credibility acts as a distortion which becomes rationally intensified under the typical first best policy of immediate liberalization a more gradual lowering of trade barriers leads to higher welfare and a greater probability that the program succeeds we derive the optimal speed of liberalization and the endogenous level of credibility

price differences among crude oils the private costs of supply disruptions i quantify the causes for price differences among crude oils that are set by the law of one price with a special emphasis on country risk for crude oils that are part of the same market i estimate cointegrating relations which represent their long run relation and error correction models which represent the rate at which the market eliminates disequilibrium in their prices results indicate that positive values of country risk impose a 0 51 price penalty on a barrel of crude oil from an unreliable supplier that increases with the variance in risk and the price of crude oil these price penalties are the first empirical estimates for how the market values the private costs of oil supply disruptions beyond country risk the price effects of sulfur content density distance between supply ports and opec membership confirm the importance of oil supply choke points opec s ability to influence prices and differences in refinery technology because private costs of a supply disruption attach only to nations with a non zero country risk previous estimates for the social costs of a supply disruption may be too large

unbiasedness and time varying risk premia in the crude oil futures market abstract this paper presents some empirical evidence on market efficiency and unbiasedness in the crude oil futures market and some related issues on the basis of monthly observations on spot and futures prices of the west texas intermediate wti crude oil several tests are carried out on the relevant hypotheses the evidence suggests that futures prices are neither unbiased nor efficient forecasters of spot prices furthermore a garch m 1 1 model reveals the existence of a time varying risk premium

trade policy under endogenous credibility in a dynamic setting if agents are skeptical of the government s motive a benevolent government one that maximizes utility of the representative individual in a small country may choose to impose a tariff even though there are no other distortions in the economy the lack of perfect information about the government s motives introduces a distortion that might require a tariff as an optimal response by the government however if individuals are bayesian learners the likelihood of a tariff is reduced when the government acts optimally in a finite amount of time free trade becomes optimal

trade liberalization credibility and self fulfilling failures abstract this paper addresses the question of whether there may be a self fulfilling aspect to the failure of liberalization attempts when it is widely known the government will abandon the reform if the central bank suffers an unacceptably large loss in reserves i derive the conditions for both sustained reform and a self fulfilling failure to be equilibrium outcomes under certain well defined conditions liberalization is most likely to succeed when the capital account is open

rational destabilizing speculation positive feedback trading and the oil bubble of 2008 abstract this article examines how the interaction of different participants in the crude oil futures markets affects the crude oil price efficiency normally the commercial market participants such as oil producers and oil consumers act as arbitrageurs and ensure that the price of crude oil remains within the fundamental value range however institutional investors that invest in crude oil to diversify their portfolios and or hedge inflation can destabilize the interaction among commercial participants and liquidity providing speculators we argue that institutional investors can impose limits to arbitrage particularly during the financial crisis when the investment demand for commodities is particularly strong in support we show that commercials hedgers had significantly reduced their short positions leading to the 2008 oil bubble they were potentially aggressively offsetting their short hedges as a result by essentially engaging in a positive feedback trading commercial hedgers at least contributed to the 2008 oil bubble these findings have been mainly overlooked by the existing research

disentangling the determinants of real oil prices in this study we quantify the impacts of economic fundamentals and derivative market speculation on the real price of crude oil using a structural var with sign restriction we determine that oil demand from the us and china particularly the latter one plays a crucial role in oil price changes after the year 2000 the contribution of speculation does not exceed 10 of oil price variations in our sample period

how should structural adjustment programs be designed abstract more than seven years have elapsed since the onset of the generalized debt crisis of 1982 yet the affected countries have still not managed to stabilize their economies these countries must now attempt structural adjustment in the midst of pervasive macroeconomic and political instability structural adjustment packages should be designed with this reality in mind this paper argues that structural adjustment programs should strive for sustainability rather than the economic liberalization that they presently stress illiberal policies which do not damage overall macro stability are preferable to liberal policies which are inherently unsustainable or engender macro instability liberalization programs that are not sustainable are likely to bring few benefits but have high costs in terms of private investment the paper discusses some of the chief implications of this opinion for the design of adjustment programs

the impact of international price shocks on china s nonferrous metal companies a case study of copper copper is one of the most important nonferrous metals for modern society which should be utilized in a sustainable way because of its non renewable nature this paper addresses the relationship between price shocks from the international copper market and china s listed copper companies international copper market price shocks are disentangled into supply shocks aggregate demand shocks and specific demand shocks using the structural vector autoregression method then the asymmetric impact of those shocks on the stock prices of china s listed copper companies is examined the results indicate that demand shocks are the dominant factor influencing copper price fluctuations with their impact on stock prices being significantly higher than those of supply shocks in the long run supply shocks and demand shocks both have significant asymmetric impacts on stock prices while in the short run specific demand shocks have an asymmetric impact on stock prices

oil prices speculation and fundamentals interpreting causal relations among spot and futures prices abstract a consensus that the world oil market is unified begs the question where do innovations in oil prices enter the market here we investigate where changes in the price of crude oil originate and how they spread by examining causal relationships among prices for crude oils from north america europe africa and the middle east on both spot and futures markets results indicate that innovations first appear in spot prices for dubai fateh and spread to other spot and futures prices while other innovations first appear in the far month contract for west texas intermediate and spread to other exchanges and contracts links between spot and futures markets are relatively weak and this may have allowed the long run relationship between spot and future prices to change after september 2004 together these results suggest that market fundamentals initiated a long term increase in oil prices that was exacerbated by speculators who recognized an increase in the probability that oil prices would rise over time

risk appetite and oil prices abstract we demonstrate that oil prices and their volatility are no longer determined solely by real economic shocks to supply of and demand for oil but are also driven by shocks originating in the economic uncertainty and risk appetite of investors that prevail in the equity market the contribution of the latter factor has become particularly remarkable since the mid 2000s to establish these results we dismantle the squared vix index determined in the s p 500 options market into the conditional variance in stock returns to proxy for economic uncertainty and the equity variance risk premium to proxy for risk appetite using threshold garch structural vector auto regression and causality models we provide evidence about the link between risk appetite oil price returns and volatility furthermore investors appetite for risk drives changes in the ovx which measures perceptions about future oil volatility but not vice versa our results provide a better understanding of the relationship between oil the vix and its two proposed components in particular we show that changes in the risk appetite of investors are an important determinant not only for the price of equities but also for that of the most important energy resource oil

determinants of opec production implications for opec behavior we estimate models that identify the economic and organizational determinants of crude oil production by individual opec nations to clarify the interpretation of econometric results we model production with specifications that resolve the statistical ordering of variables and estimate models with techniques that can cope with stochastic trends in the time series we also analyze the short run dynamics for asymmetries that may carry important insights about opec behavior results indicate that quotas are an important determinant of production and their effects generally are symmetric which implies that opec is an organization that influences production and ultimately prices real prices generally have a positive effect on production and the size of this effect may depend on spare capacity which implies that opec behaviors also embody competitive elements finally all nations other than saudi arabia show some form of production sharing behavior which may imply that opec shares mismatches between the call for opec production and opec quotas

spillover effects in energy futures markets price discovery in crude oil and refined oil products has been extensively undertaken in organised futures markets for over a decade now there are two dominant such markets today the first one in the new york mercantile exchange and the second in london s international petroleum exchange with the demise of opec as the leading price setter for crude and products nymex light sweet crude and brent crude have usurped the role of benchmark grades for price setting to date considerable work has been done to scrutinise the degree to which these two markets price efficiently but little with regard to the way the two markets interact participants in these markets move with relative ease from one market to the other and usually take positions in both of them it is of interest therefore to investigate the information transmission mechanism by looking at spillover effects and perhaps identify which market is the true price leader this paper is a first attempt to look at such a problem in the energy market although similar studies have been done on stock market indices it is found that substantial spillover effects do exist when both markets are trading simultaneously although ipe morning prices seem to be considerably affected by the close of the previous day on nymex q 2001 elsevier science b v all rights reserved

speed of adjustment and self fulfilling failure of economic reform abstract an economic reform programme where inefficient public labour is laid off is considered the immediate effect is a lowering of wages and increased profitability in the private modern sector over time as capital accumulates in the modern sector wages and production increases big bang reform generates a sharp transitory drop in wages while gradual reform gives a more modest decline in the presence of a subsistence wage constraint popular resistance can cause the cancellation of big bang reform two arguments for gradualism can in that case be made first a more gradual reform requires a less abrupt drop in the wage and will therefore be feasible second the initial wage drop will be stronger if a cancellation of reform is expected and since cancellation is dependent on the severity of the initial wage drop multiple equilibria occurs the existence of multiple equilibria is dependent on the speed of reform sufficiently gradual programmes have a unique successful equilibrium

speculative trading and oil price dynamic a study of the wti market abstract the aim of this paper is to study the oil price dynamic in west texas intermediate wti market in the us by using statistical and econometric tools we first attempt to identify the long term relationship between wti spot prices and the prices of futures contracts on the new york mercantile exchange nymex subsequently we model the short term dynamic between these two prices and this analysis points up several breaks on this basis a short term markov switching vectorial error correction model ms vecm with two distinct states standard state and crisis state has been estimated finally we introduce the volumes of transactions observed on the nymex for the wti contracts and we estimate the influence of the non commercial players we conclude that the hypothesis of an influence of non commercial players on the probability for being in the crisis state cannot be rejected in addition we show that the rise in liquidity of the first financial contracts as measured by the volume of open interest is a key element to understand the dynamics in market prices

a characterization of oil price behavior evidence from jump models abstract this paper is concerned with the statistical behavior of oil prices in two ways it firstly applies a combined jump garch model in order to characterize the behavior of daily weekly as well as monthly oil prices secondly it relates its empirical results to implications of hotelling type resource extraction models the empirical analysis shows that oil prices are characterized by garch as well as conditional jump behavior and that a considerable portion of the total variance is triggered by sudden extreme price movements this finding implies that first oil price signals are not reliable and as a consequence both finding optimal extraction paths and decisions regarding the transmission to alternative technologies are likely to be compromised second this behavior is in stark contrast to the notion of deterministic trends in the price of oil

using stockpile delegation to improve china s strategic oil policy a multi dimension stochastic dynamic programming approach abstract there has been much attention paid to oil security in china in recent years although china has begun to establish its own strategic petroleum reserve spr to prevent potential losses caused by oil supply interruptions the system aiming to ensure china s oil security is still incomplete this paper describes and provides evidence for the benefits of an auxiliary strategic oil policy choice which aims to strengthen china s oil supply security and offer a solution for strategic oil operations with different holding costs in this paper we develop a multi dimension stochastic dynamic programming model to analyze the oil stockpile delegation policy which is an intermediate policy between public and private oil stockpiles and is appropriate for the chinese immature private oil stockpile sector the model examines the effects of the oil stockpile delegation policy in the context of several distinct situations including normal world oil market conditions slight oil supply interruption and serious oil supply interruption operating strategies that respond to different oil supply situations for both the spr and the delegated oil stockpile were obtained different time horizons interruption times and holding costs of delegated oil stockpiles were examined the construction process of china s spr was also taken into account

the impact of the asian crisis on the behavior of us and international petroleum prices the strong long run relationships among the petroleum spot and futures prices have weakened after the asian crisis as manifested in less co integration among these prices in the post crisis period the directional causal relationships have either changed the direction as in the case of wti crude or weakened somewhat as in the case of nymex gasoline and heating oil these changes should complicate the job of those who try to benefit from predicting the movements of petroleum prices after the asian crisis in the international gasoline spot markets movements in the nymex gasoline price are found to precede movements in the gulf coast and rotterdam gasoline prices in the pre crisis period and the movements of these prices and those of the singapore price in the post crisis period implying that the nymex price is the gasoline leader in both periods the monday friday day of the week effect is only significant for the nymex gasoline 1 month and 3 month futures prices and the gulf coast gasoline spot economic and political shocks related to the spot prices have greater impacts on all prices than shocks related to the futures prices regardless of the petroleum type and the time period

is the spot market for oil products efficient some rotterdam evidence abstract this paper presents evidence relating to the efficiency of the rotterdam market for oil products analysis of daily weekly and monthly price changes for gas oil during the period 1978 1983 results in the rejection of the efficiency hypothesis ie relative price changes have been serially dependent on the basis of this observation a very simple trading rule is developed this rule is tested out simulating market transactions during the first two quarters of 1984 the financial outcome of this game turns out to be rather rewarding

the third oil price surge what s different this time the period from 2003 to 2008 was marked by an oil price increase comparable to the two oil price crises in the 1970s this paper looks in detail at the situation of the oil price crises 30 years ago and compares them along various aspects on the demand and supply side with the recent price increase to identify similarities and differences while both oil price crises in 1973 and 1979 1980 were ultimately caused by supply actions of members of the organisation of petroleum exporting countries opec all three oil price crises were preceded by high demand growth other aspects that favoured a high oil price in all three cases were low investments in new oil fields as a consequence low spare capacity and a weak us dollar in addition the recent oil price surge has been characterised by a high global refinery utilisation and refineries that did not adapt fast enough to the rising demand for lighter oil products moreover broader geopolitical uncertainties combined with risks associated with the oil trade helped push the oil price into a triple digit zone speculation played only a limited and temporary role in accelerating price movements during the recent price increase

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

the effect of the financial sector on the evolution of oil prices analysis of the contribution of the futures market to the price discovery process in the wti spot market abstract the aim of this article is to empirically measure the contribution of the futures market to the price discovery process in the spot market for benchmark crude oils specifically that for west texas intermediate wti for this purpose we test the hypothesis that the recent evolution of the financial markets has affected the future oil market so as to increase its contribution to the price discovery process of the spot market we modeled the relation between wti spot and future prices as a cointegration relation by using the kalman filter technique it was possible to obtain a time varying measure of the contribution of future markets to the price discovery mechanism the results show that in the case of wti the contribution of the futures market has been increasing especially between 2003 and 2008 and then again after the start of 2009 evidencing the growing importance of factors particular to the financial markets in determining oil prices in recent years during 2009 the spot prices adjusted to agents future expectations rather than to the current supply and demand conditions

tariffs and the risk of invasive pest introductions in commodity imports theory and empirical evidence abstract we investigate using tariffs as corrective taxes to reduce risks from biological invasions due to expanded world trade a theoretical analysis indicates that higher tariffs have ambiguous effects on invasive pest introductions an econometric analysis using data from us department of agriculture surveillance screening indicates that tariff rates exert a negligible influence on expected invasive pest introductions from commodities currently facing positive tariffs removal of duty free status would decrease expected pest intercepts but undermine other goals of us trade policy and lower consumer welfare consumer welfare loss is on the order of 38 million per expected intercept avoided

an information diffusion based model of oil futures price abstract inspired by the increasing evidence of financialization speculation in commodity pricing this paper constitutes a first attempt to build an information diffusion based asset pricing framework for the oil futures market with gradual information dissemination slowly decaying uncertainty about the asset s future fundamentals generates persistent conditional volatility and a drift in asset return volatility based proxies for information flows are proposed to examine empirically the asset pricing implications the results confirm a significant intertemporal relationship between return on the price of oil futures information diffusion and volatility components an important implication of our study is that the slow diffusion of information generates predictability in price dynamics a forecasting model is then constructed and tested in relation to our theory it is found that the lagged series of the pricing factors possess significant predicting power for returns

borrow and adjust fiscal policy and sectoral adjustment in an open economy should the government run fiscal deficits in response to an adverse external shock that warrants transfer of resources from production of nontraded to traded goodsq this article considers normative fiscal policy implications of sectoral adjustment costs in a two sector model with overlapping generations fiscal deficits benefit present generations by depleting foreign assets and slowing down the adjustment process we show that despite no nominal rigidities temporary fiscal deficits increase social welfare if adjustment costs prevent immediate sectoral reallocation of inputs if there are no adjustment costs the case for fiscal deficits vanishes copyright 2003 by the economics department of the university of pennsylvania and osaka university institute of social and economic research association

capital accumulation unemployment and self fulfilling failure of economic reform abstract i consider fiscal reform and the consequences of expectations about reform cancellation the reform implies reduced taxes and the laying off of employees in an inefficient public sector if the resulting unemployment level declines sufficiently fast the reform is completed on the other hand if high unemployment levels prevail for too long the reform is cancelled cancellation affects the return on capital negatively hence expectations about cancellation will depress capital accumulation and increase the level of unemployment as a result multiple rational expectation equilibria may arise where expectations about cancellation prove self fulfilling the modelling framework is leontief technology in combination with ramsey optimization that exhibits simple and attractive algebra