Destabilizing role of futures markets on North American hard red spring wheat spot prices

The objective of the paper is to determine if the futures prices of hard red spring wheat (HRSW) have stabilizing or destabilizing impact on spot HRSW price in North America. Several important results emerge from thorough empirical analysis. First, both Granger causality tests and directed acyclic graph algorithms (DAGs) point to two-way causality between futures and spot HRSW prices and thus endogeneity in both prices formation. To the contrary, both procedures suggest that ending stocks are exogenous to spot and futures HRSW prices. Both vector error correction model and impulse response functions point to a large and long-lasting impact of a shock to futures price on spot price level. Finally, variance decomposition analysis indicates that futures prices are responsible for the bulk of spot price volatility in both short and long run. Our result is consistent with those of theoretical models suggesting that when production (supply side) is the dominant disturbance, spot price is destabilized in both the short and the long run by futures prices. An important implication of this research is the need for alternative market mechanisms or alternative farm policy measures that would mitigate price risk and ensure sustainable farming of American HRSW farmers.     

Economic uncertainty,oil prices,hedging and U.S. stock returns of the airline industry

This paper examines the impacts of economic policy uncertainty and oil price shocks on stock returns of U.S. airlines using both industry and firm-level data. Our empirical approach considers a structural vector-autoregressive model with variables recognized to be important for airline returns including jet fuel price volatility. Empirical results confirm that oil price increase, economic uncertainty and jet fuel price volatility have significantly adverse effect on real stock returns of airlines both at industry and at firm level. In addition, we also find that hedging future fuel purchase has statistically positive impact on the smaller airlines. Our results suggest policy implications for practitioners, managers of airline industry and commodity investors.     

Predicting housing prices in China based on modified Holt's exponential smoothing incorporating whale optimization algorithm

The forecast of the real estate market is an important part of studying the Chinese economic market. Most existing methods have strict requirements on input variables and are complex in parameter estimation. To obtain better prediction results, a modified Holt's exponential smoothing (MHES) method was proposed to predict the housing price by using historical data. Unlike the traditional exponential smoothing models, MHES sets different weights on historical data and the smoothing parameters depend on the sample size. Meanwhile, the proposed MHES incorporates the whale optimization algorithm (WOA) to obtain the optimal parameters. Housing price data from Kunming, Changchun, Xuzhou and Handan were used to test the performance of the model. The housing prices results of four cities indicate that the proposed method has a smaller prediction error and shorter computation time than that of other traditional models. Therefore, WOA-MHES can be applied efficiently to housing price forecasting and can be a reliable tool for market investors and policy makers.     

Was the expansion of housing credit in Japan good or bad?

This paper shows, using data from the Family Income and Expenditure Survey, that housing credit has become increasingly available over time in Japan, especially since 2000, and that this has made it easier for Japanese households to purchase housing and enabled them to do so at an earlier age. However, it also shows that the greater availability of housing credit has increased households’ housing loan repayment burden, which has resulted in their cutting back on their other consumption expenditures and created the potential for retirement insecurity. Another concern is that the increasing availability of housing credit has been accompanied by a pronounced shift from fixed-rate to variable-rate housing loans. This is cause for concern given the low level of financial literacy that prevails among the Japanese population and the likelihood that interest rates on variable-rate housing loans will be raised sooner or later as monetary policy is tightened.     

Volatility spillovers between WTI and Brent spot crude oil prices: an analysis of granger causality in variance patterns over time

There has been an increase in price volatility in oil prices during and since the global financial crisis (GFC). This study investigates the Granger causality patterns in volatility spillovers between West Texas International (WTI) and Brent crude oil spot prices using daily data. We use Hafner and Herwartz’s (2006) test and employ a rolling sample approach to investigate the changes in the dynamics of volatility spillovers between WTI and Brent oil prices over time. Volatility spillovers from Brent to WTI prices are found to be more pronounced at the beginning of the analysis period, around the GFC, and more recently in 2020. Between 2015 and 2019, the direction of volatility spillovers runs unidirectionally from WTI to Brent oil prices. In 2020, however, a Granger-causal feedback relation between the volatility of WTI and Brent crude oil prices is again detected. This is due to the uncertainty surrounding how the COVID-19 pandemic will evolve and how long the economies and financial markets will be affected. In this uncertain environment, commodities markets participants could be reacting to prices and volatility signals on both WTI and Brent, leading to the detection of a feedback relation.     

Economic interpretations of DEA

Research on productive efficiency at the firm level has developed as an important and active strand of research the last decades, both within operations research, management science and economics. Two apparently different definitions of efficiency are examined, but it is shown that when both estimation methods are based on solving linear programming problems the definitions of efficiency are identical. The purpose of the paper is to give the basic ideas of efficiency analyses using DEA as a tool for researchers not so familiar with efficiency analysis and DEA. The concept of shadow prices is given special attention.     

The effect of economic policy uncertainty on China’s housing market

This study examines the relationship between economic policy uncertainty (EPU) and housing price at the macro-level in China as a developing country. The empirical evidence indicates that EPU has a leading effect on China’s housing market. In general, the housing market is prosperous when economic policy is stable and there is a positive relationship between housing price variation and EPU, which means housing market risk grows under unstable economic policies in this developing economy. Moreover, economic policy variation affects low-amplitude changes in housing prices. A variation of policy uncertainty enhances the risk premium of the housing market. By contrast, the level of EPU influences high-amplitude changes in housing prices, which reflects the trend of EPU dominating China's housing market.     

If you,tourist, behave irrationally,I’ll find you!

When departures from rational behavior can potentially be expected, modeling should allow for their identification and their quantification. In this regard, prices in tourism might have effects that may not be as apparent as economic theory predicts. This article incorporates the sticker shock formulation into the mixed logit model without imposing consistency with consumer theory to accommodate any possible positive or negative price effects. By allowing the parameters of “price” and “sticker shock term” to take any value – negative or positive – we detect abnormal behaviors in the tourist demand: not only is the negative relationship between price and demand inverted for some people but also some tourists might be willing to accept higher-than-expected prices. The “non-well-behaved” groups' shares are estimated.     

Effects of export product diversification on quality upgrading: an empirical study

This paper empirically examines the effects of export product diversification on overall export quality in a panel data set of 115 countries from 1970 to 2010. It uses the data sets of the overall export quality and three export diversification measures of the International Monetary Fund: the extensive margin (variation in the number of new products exported), the intensive margin (variation in export values among existing exports), and the overall (Theil) index. It finds that export quality has only been increasing with a higher variation in export values among existing exports in low- and lower-middle-income countries. It also observes that export quality has been increasing with both a higher variation in export values among existing exports and new products exported in upper-middle- and high-income countries. The results are robust to the changing measures of controls in the benchmark model, the inclusion of many other controls; i.e. various measures of globalization, country size, factor endowments, macroeconomic stance, etc., and the exclusion of outliers.     

Time-frequency co-movements between oil prices and interest rates: Evidence from a wavelet-based approach

This paper investigates time–frequency co-movements between crude oil prices and interest rates. To test this relationship, the study applied a continuous wavelet and cross wavelet approaches to data from West Texas Intermediate (WTI) crude oil prices and interest rates in the United States (U.S.). Results from the sample period revealed significant relationships, in the intermediate term, between WTI crude oil prices and U.S. interest rates. Moreover, co-movements between oil price and interest rate variables were especially sensitive during abnormal political events and periods of financial ‘meltdown’. We further use Partial Wavelet Coherence (PWC) and Multiple Wavelet Coherence (MWC) methods to investigate the impacts of five major control variables namely GDP growth, unemployment, three-month Treasury bill, CPI index and industrial production index. The results show a powerful impact of control variables on oil-interest rates co-movements under different frequencies. Finally, we show evidence of co-integrating long run relationship between oil markets and control variables. These results have important implications for energy investors and policy makers.