threshold effects in price transmission the case of brazilian wheat maize and soya prices recent studies into price transmission have recognized the important role played by transport and transaction costs threshold models are one approach to accommodate such costs we develop a generalized threshold error correction model to test for the presence and form of threshold behavior in price transmission that is symmetric around equilibrium we use monthly wheat maize and soya prices from the united states argentina and brazil to demonstrate this model classical estimation of these generalized models can present challenges but bayesian techniques avoid many of these problems evidence for thresholds is found in three of the five commodity price pairs investigated

market institutions and price relationships the case of coffee in the ethiopian commodity exchange while the ethiopian commodity exchange ecx is widely considered a successful market institution very little rigorous empirical investigation has been done on it this paper contributes to filling this knowledge gap using a unique set of spatially disaggregated prices for five different coffee varieties we examine how the ecx has influenced the dynamics of international and domestic prices for coffee the largest traded commodity in terms of trade value on the exchange floor we follow a multivariate generalized autoregressive conditional heteroscedasticity garch approach to assess the extent of market interdependence conditional correlations and volatility transmission we also evaluate structural changes in price dynamics over time our results suggest that contrary to popular media stories the ecx s success in strengthening coffee price relationships has been limited we discuss the underlying reasons and implications of this finding

pension deficits an unnecessary evil many companies believe that underfunding pension plans is an inexpensive way to borrow from employees and that mismatching equity investments to bondlike pension promises creates shareholder value to the contrary financial economics calls for fully funding and immunizing accrued pensions for nonguaranteed pensions inadequate funding magnifies employees exposure to their employers financial health exposure that they cannot diversify fully securing the pensions eliminates this inefficiency in employee compensation governmental guarantees eliminate the employees pension risk but invite weak sponsors to extract subsidies from strong ones through underfunding a statutory requirement of full funding and immunization would eliminate these subsidies

determinants of portfolio performance ii an update 1991 determinants of portfolio performance ii an update financial analysts journal vol 47 no 3 pp 40 48

social security privatization a structure for analysis this paper identifies the key economic issues that must be addressed in the debate over a privatized social security system we examine a two pillar plan the first pillar would consist of a demogrant a small indexed pension of the same dollar amount for all retirees who had contributed to the system over a full lifetime of work the second pillar would consist of a fully funded individual defined contribution account financed by payroll taxes held in financial institutions and directed by participants we explore how such a system would affect the risks households face how it would alter the distribution of income and how it might influence household behavior including incentives to work and save and portfolio choices we also examine macroeconomic issues how the transition to a private plan would occur and what the likely effects would be on national saving we conclude that a two pillar system offers several positive features namely a reduction in political risk an increase in household portfolio choice and improved work incentives disadvantages include less redistributiveness and national risk sharing and increased administrative costs this abstract was borrowed from another version of this item

investor mood herding and the ramadan effect in view of evidence linking herding and social mood we examine whether the positive mood documented during ramadan translates into higher herding compared to non ramadan days drawing on a sample of seven majority muslim countries we report significant herding during ramadan in most of our sample markets additionally we show that herding appears significantly stronger within rather than outside ramadan for most tests whereby its significance is manifested on both ramadan and non ramadan days overall herding significance within outside ramadan exhibits some variation in its levels across markets in relation to variables reflective of market states both domestically market returns market volume and internationally us market returns us investors sentiment global financial crisis market states

why are african commodity exchanges languishing a case study of the zambian agricultural commodity exchange abstract food price volatility and high transactions costs remain major problems in african food markets these persistent problems provide a strong theoretical justification for the development of commodity exchanges however the majority of african commodity exchanges remain underdeveloped through a case study of the zambian agricultural commodity exchange zamace this article explores why agricultural commodity exchanges in the region have thus far failed to develop into sustainable trading platforms and identifies the most important changes needed to enhance their performance drawing on interviews and group discussions with the primary participants on zamace five main factors that impede volumes traded on the zamace exchange are identified and analyzed 1 the limited success in attracting financial institutions commitment to commodity exchanges 2 the anonymous nature of trading on a commodity exchange exacerbates the risks associated with contract non compliance and opportunistic behavior 3 the potential for conflict of interest among brokers 4 the potential for market manipulation in a thinly traded market and 5 the high fixed costs that are imposed on actors trading in a thin market exacerbating all these factors is the unpredictability of government intervention in cereal markets

price transmission and trader entry in domestic commodity markets abstract using detailed data from three simultaneous surveys of producers traders and exporters this paper examines the transmission of international coffee prices through the domestic value chain in uganda we find that producer price fluctuations are inconsistent with constant transaction costs we investigate three possible explanations for this finding storage and contango marketing costs that increase with price and trader entry that raises search time we test and reject the storage and marketing costs explanation but we find some evidence of trader entry in response to a rise in export price our findings suggest that small itinerant traders enter in response to an export price increase probably taking advantage of farmers ignorance of the rise in wholesale price

do energy prices stimulate food price volatility examining volatility transmission between us oil ethanol and corn markets this paper examines volatility transmission in oil ethanol and corn prices in the united states between 1997 and 2011 we follow a multivariate garch approach to evaluate the level of interdependence and the dynamics of volatility across these markets preliminary results indicate a higher interaction between ethanol and corn markets in recent years particularly after 2006 we only observe however significant volatility spillovers from corn to ethanol prices but not the converse we also do not find major cross volatility effects from oil to corn markets the results do not provide evidence of volatility in energy markets stimulating price volatility in grain markets

spatial equilibrium and price transmission between southern african maize markets connected by informal trade policies regulating the international grain trade in southern africa sa are motivated by uncertainty regarding private sector performance and in turn private sector performance is generally constrained by the policy environment we study spatial price transmission between sa maize markets where trade is dominated by informal product flows this provides an opportunity to study private sector market performance in a largely unregulated market environment contrary to some existing evidence on the performance of sa grain markets connected by formal trade we find that informally trading markets work quite well long run price equilibrium is consistent with competitive trade price transmission is rapid and potential trade constraints have no disruptive impact on long run relationships nevertheless we do find evidence of occasionally high transfer costs that may impede informal trade flows the conclusion is that a policy focus on encouraging informal trade and lowering informal trade costs would lead to improved market performance

rewriting monetary policy 101 what s the fed s preferred post crisis approach to raising interest rates abstract for many years prior to the global financial crisis the federal open market committee set a target for the federal funds rate and achieved that target through small purchases and sales of securities in the open market in the aftermath of the financial crisis with a superabundant level of reserve balances in the banking system having been created as a result of the federal reserve s large scale asset purchase programs this approach to implementing monetary policy will no longer work this paper provides a primer on the fed s implementation of monetary policy we use the standard textbook model to illustrate why the approach used by the federal reserve before the financial crisis to keep the federal funds rate near the federal open market committee s target will not work in current circumstances and explain the approach that the committee intends to use instead when it decides to begin raising short term interest rates

determinants of portfolio performance in order to delineate investment responsibility and measure performance contribution pension plan sponsors and investment managers need a clear and relevant method of attributing returns to those

the provision of incentives in firms i ncentives are the essence of economics despite many wide ranging claims about their supposed importance there has been little empirical assessment of incentive provision for workers the purpose of this paper is to critically overview existing work on the provision of incentives since the interests of workers and their employers are not always aligned a large theoretical literature has emphasized how firms design compensation contracts to induce employees to operate in the firm s interest this literature has reached into many areas of compensation and has pointed to a multitude of different mechanisms that can be used to induce workers to act in the interests of their employers these include piece rates options discretionary bonuses promotions profit sharing efficiency wages deferred compensation and so on my objective here is to evaluate this literature in the light of a growing empirical literature on compensation where possible i will address the literature from two perspectives first an underlying assumption of this literature is that individuals respond to contracts that reward performance accordingly i consider whether agents behave in this way and whether these responses are always in the firm s interest second i address whether firms write contracts with these responses in mind in other words do contracts look like the predictions of the theory incentives are provided to workers

privatizing social security at home and abroad a century has passed since otto von bismarck instituted the first social security system in germany since then government provision of retirement income has spread around the globe alleviating poverty among the elderly providing life span insurance via old age annuities overcoming the samaritan s dilemma by forcing everyone to save and in many countries extending coverage to include old age health insurance but for all the good it has done social security is severely limiting world saving investment and growth it threatens to bankrupt the young and future generations of some of the world s leading nations see jagadeesh gokhale et al 1996 it is the chain letter pay as you go method of financing social security that lies at the heart of the problem taking income from young savers and giving it to old spenders while placating the young with promises of repayment not only reduces national saving but straddles the next generation with the obligation the debt to meet these promises the size of these debts and the burden on the next generation will be much greater for countries with rapidly aging populations would privatization solve social security s problems this paper provides a framework for thinking about this issue

social security national policies with international implications social security policies within individual countries are determined independently by national governments but the resulting outcome is inefficient compared with what would result from the international co ordination of policies this is because national social security policies produce international externalities via their effects on world interest rates an illustrative example suggests that the gains from co ordination are potentially significant virtually all countries operate social security or redistributive policies each chooses policies independently and to my knowledge no one either in a policymaking context or in the large literature on international policy co ordination has suggested that such decisions would benefit from international coordination 1 however a simple argument suggests that independent national social security policies are inefficient more specifically in the long run national governments make policy decisions which are too egalitarian this holds provided that social security lowers national saving in this case each national government faces a trade off between income redistribution and national saving and can be assumed to locate at the nationally optimal point on this trade off taking as given the world interest rate the latter is clearly not independent of the combined effect of all countries policies however if all countries expand social security the resulting fall in world saving will raise the world interest rate with adverse consequences for each national economy each country rationally ignores its own small contribution to the global outcome if this international externality were internalised by co ordination countries would relocate on the trade off between income redistribution and national saving demonstrating the existence of an externality says nothing about its quantitative significance i address this with an example which focuses on pay as you go payg retirement pensions in an economy with a mixture of forward looking and myopic individuals the pensions prevent destitution among retired myopes and thus effectively redistribute life time welfare but they also lower saving because of payg financing for all parameter values considered international co ordination of pensions policy decisions generates welfare gains which are larger for many parameter values substantially larger than recent estimates of the welfare gains from either the entire elimination of all cyclical fluctuations or the reduction of inflation and nominal interest rates from suboptimally high to optimal levels hence the issues addressed in the paper are quantitatively significant when judged against other frequently advocated i am grateful to two anonymous referees for helpful comments on earlier versions they are not responsible for the present version

how does future income affect current consumption this paper tests a straightforward implication of the basic life cycle model of consumption that current consumption depends on expected lifetime income the paper projects future income for a panel of households and finds that consumption is closely related to projected current income but unrelated to predictable changes in income however future income uncertainty has an important effect consumers facing greater income uncertainty consume less the results are consistent with buffer stock models of consumption like those of deaton 1991 or carroll 1992a 1992b where precautionary motives greatly reduce the willingness of prudent consumers to consume out of uncertain future income

modelling trends in food market integration method and an application to tanzanian maize markets abstract pushed by increasing availability of price data and extensive market liberalisation efforts in many developing countries research on food market integration has evolved rapidly over the last two decades empirical methods to measure market integration diverged in two directions on the one hand there is the parity bounds model pbm using a switching regressions technique while on the other hand the use of threshold autoregressive tar models has been proposed this article provides a discussion on the two methods and argues that tar models are better able to capture the dynamics of the arbitrage process underlying interconnected markets furthermore we extend the standard tar model to include a time trend in both the threshold and the adjustment parameter using weekly maize price data on seven selected markets in tanzania we illustrate how both transaction cost and the speed of adjustment have changed during the nineties

market interdependence and volatility transmission among major crops this article provides a comprehensive analysis of the dynamics of volatility across major agricultural commodities in the united states volatility interactions across markets may lower the effectiveness of diversification strategies to mitigate price risks and should be taken into account when analyzing the pricing behavior of different agricultural commodities we follow a multivariate garch approach to evaluate the time evolution of conditional correlations and volatility transmission across corn wheat and soybeans price returns on a daily weekly and monthly basis the period of analysis is from 1998 to 2012 the estimation results indicate a lack of lead lag relationships between corn wheat and soybeans price returns at the mean level we find however important volatility spillovers across commodities particularly at the weekly and monthly level wheat and corn seem to play a major role in terms of volatility transmission despite the supposed higher financial market integration of agricultural commodities we do not observe that agricultural markets have become more interdependent in recent years

the portable guarantee to exchange back an old defined benefit for a new defined contribution dc pension plan as a defined contribution dc pension plan is introduced to replace a defined benefit db pension plan the portability benefit from a dc pension plan costs the employees to bear the investment risk from managing the pension fund to protect the retirement income and maintain the portability benefit a guarantee to exchange back the old defined benefit is supposed to be demanded for the new dc plan s participants in the guarantee market in light of such a demand this article applies a claim terminating insurance pricing model to offer a contingent claims pricing model for a portable pension guarantee using the new labor pension plan of taiwan as an illustration a guaranteed dc pension will carry an extra cost of almost 50 up to over 100 of the plan s contributions over the participant s work life given the current mandatory minimum requirement of a contribution rate of 6

rear view mirror driving in defined contribution systems the strange formula of the chilean pension funds the pioneering regulation on chilean pension funds under defined contribution program requires private managing institutions to exclusively manage individual accounts and meet a minimum return to their clients the purpose of this study is to empirically investigate the investment behaviour of pension funds and to contribute to the social security debate the findings reveal the benchmark significantly explains funds performance pension funds tend to replicate their asset allocations to exhibit similarities in returns we believe the obligation on fund managers to attain a minimum guaranteed return based on relative performance evaluation encourages them not to deviate from the industry s performance indeed the benchmark explains most of the group performance to hold similar allocations managers may monitor each others through their investment style

the federal reserve s tools for policy normalization in a preferred habitat model of financial markets we develop a model to analyze monetary policy implementation with multiple federal reserve liabilities and superabundant reserves the analysis demonstrates the federal reserve s tools including interest on excess reserves ioer overnight reverse repurchase agreements on rrp and term deposits should allow the federal reserve to raise the short term interest rates to any desired level we find the contribution of each the increase in the ioer and on rrp offering rates in firming money market rates suggested by the data during the december 2015 policy tightening event is remarkably similar to the effect of each tool implied by the calibrated model

how do banks adjust to changing input prices a dynamic analysis of u s commercial banks before and after the crisis abstract the 2000 2013 period was characterized by substantial regulatory monetary and technological change especially after the onset of the global financial crisis this study assesses the total impact of these policy shifts and technological changes on u s commercial banks short run and long run substitution elasticities an endogenous break test divides the sample into a pre crisis period and a post crisis period during the former period banks inputs tend to be inelastic substitutes after the onset of the crisis particularly the long run substitutability of most input factors decreases to even lower levels due to changes in both cost technology and economic conditions at the same time banks response to input price changes becomes more sluggish hence especially after the onset of the crisis banks have little flexibility regarding input factor usage and are thus sensitive to input price changes from a cost perspective

multiple regime spatial price transmission with an application to maize markets in southern africa conventional threshold models of price transmission allow for different speeds of adjustment to equilibria depending on the magnitude of price differentials between markets however these models typically assume only one underlying long run equilibrium price relationship in this article we develop a framework for allowing multiple equilibria and multiple speeds of adjustment with regime separation depending on the magnitude of trade flows between regions rather than the magnitude of price differentials applying this framework to maize price transmission between south africa and zambia shows no transmission during periods of high imports when the government was heavily involved in maize importation but stronger transmission during periods of low imports when the government was not importing copyright 2012 oxford university press