The determinants of retail petrol prices in Greece

The purpose of this article is to examine the relationship between retail prices of petrol, international oil prices and tax rates in Greece. We examine not only the hypothesis that retail prices act asymmetrically to crude oil price changes and the pass-through rates of tax increases, but also use the cross-sectional dimension of the data to explore whether the existence or otherwise of market power affects retail prices. Our results provide little evidence for asymmetric behaviour. However, the degree to which prices overreact to tax changes and the significance of market power across the different regions suggests that the market for petrol/diesel is not very competitive.     

The determinants of privatization prices: evidence from Turkey

This paper analyses the determinants of privatization prices in a multi-industry study using a sample of 68 recently privatized firms from Turkey. Results show that revenue and market characteristics are significant determinants of privatization prices while current cost and profit indicators are not. It is argued that potential buyers regard these state firms as inefficient, therefore do not take into consideration their current costs and profits in determining their value. When the dependent variable is altered by dividing the firm's privatization price by the firm's sales (revenues), it is found that sales-adjusted privatization prices are responsive to firms profit margins. However, this result does not hold when the sample is restricted to a single industry. Profit margins along with other profitability and firm efficiency measures are no longer significant determinants of sales-adjusted privatization prices in the cement industry analysis. Unexploited production opportunities measured by capacity utilization ratios, and complete private ownership resume a more important role.     

Trends and determinants of energy innovations: patents,environmental policies and oil prices

ABSTRACT

This paper examines the relationship between energy innovations, environmental policies and oil prices. With a panel of 19 OECD countries over the period 1990–2013, we test how the stringency of environmental policies has affected the intensity of energy patents, while controlling for the effect of oil prices and other country-level variables. We found that the overall level of policy stringency has exerted a more significant impact than individual country measures. Moreover, the recent reduction of energy patenting is discussed, especially in the light of the staggering drop of oil prices.     

Conditional correlations in the returns on oil companies stock prices and their determinants

The identification of the forces that drive stock returns and the dynamics of their associated volatilities is a major concern in empirical economics and finance. This analysis is extremely important for determining optimal hedging strategies. This paper investigates the stock prices’ returns and their financial risk factors for several integrated oil companies, namely Bp (BP), Chevron-Texaco (CVX), Eni (ENI), Exxon-Mobil (XOM), Royal Dutch (RD) and Total-Fina Elf (TFE). We measure the actual co-risk in stock returns and their determinants “within” and “between” the different oil companies, using multivariate cointegration techniques in modelling the conditional mean, as well as multivariate GARCH models for the conditional variances. The distinguishing features of this paper are: (i) focus on the determinants of the market value of each company using the cointegrated VAR/VECM methodology; (ii) specification of the conditional variances of VECM residuals with the Constant Conditional Correlation (CCC) multivariate GARCH model of Bollerslev [(1990) Review of Economics and Statistics 72:498–505] and the Dynamic Conditional Correlation (DCC) multivariate GARCH model of Engle [(2002) Journal of Business and Economic Statistics 20:339–350]; (iii) discussion of the performance of optimal hedge ratios calculated with the DCC estimates. The “within” and “between” DCC indicate time-varying interdependence between stock return volatilities and their determinants. Moreover, DCC models are shown to produce more accurate hedging strategies.     

Exchange traded funds: leverage and liquidity

This paper examines the differences between leveraged and unleveraged Exchange Traded Funds (ETFs), particularly for liquidity and volatility characteristics. The impact of leverage on intraday liquidity (spread and depth) is analysed in two periods – one of normal volatility and the other of abnormal/high volatility. There is a significant difference in spread and depth of leveraged and unleveraged ETFs in periods of both normal volatility and high volatility; however, this difference is more pronounced in higher volatility periods. In high volatility periods, liquidity typically diminishes in all ETFs, and this is even more so for the leveraged ETFs. When leveraged ETFs are segregated into multiples based on their power to replicate the underlying benchmark (i.e. multiples of ?3, ?2, ?1, 2, 3), the difference in spreads between normal and high volatility periods is typically larger. The double-leveraged ETF has the most significant difference between the positive and negative counter parts. However, the relationship in the progression of the multiples does not change linearly to correspond with the level of volatility. This may be due to the nonlinear relation between volume and volatility. We shed light on the magnification effect of financial leverage on microstructure of the ETFs.     

On the determinants of complementarity: Elasticities of substitution, income shares, and relative prices

This paper extends an example due to Samuelson (1974) to develop the relationship between possible compensated complementarity between two goods and the two elasticities of substitution in an extended three good CES utility function. It also uses the same utility function to develop the implications of a generalized income share parameter and two different relative prices for possible complementarity between goods. Finally, it explores possible complementarity in a more general utility function with non-constant elasticities of substitution.     

Commodity prices and related equity prices

This paper shows that commodity‐sensitive stock price indices have strong power in predicting nominal and real commodity prices at short horizons (one‐month‐ahead predictions) using both in‐ and out‐of‐sample tests. The forecasts based on commodity‐sensitive stock price indices are able to significantly outperform naïve no‐change forecasts. For example, the one‐month‐ahead forecasts for nominal commodity prices reduce the mean squared prediction error by between 1.5% (for natural gas prices) and 20% (for copper prices). Moreover, the one‐month‐ahead directional forecast is found to perform significantly better than a 50:50 coin toss. As stock prices are not subject to revision, the proposed variable, which reflects timely and readily available market information, can potentially be a valuable predictor and thereby help to improve the accuracy of commodity price forecasts.     

The demand for traded and non-traded goods in the U.S.

Annual postwar U.S. data are used to estimate the Rotterdam demand model for traded and non-traded goods. The estimated income elasticity is 1.51 for traded and 0.64 for non-traded goods, while the own-price elasticities are both between −0.3 and −0.2.     

Consumer prices,wholesale prices,and causality

This paper uses the Wald variant of the Granger direct causality test recently prescribed by Geweke, Meese, and Dent (1983) to assess the causal nature of the pairwise relationship between U.S. consumer and wholesale (producer) prices. For the sample period, January 1947 to December 1983, as well as for the two sample subperiods, January 1947 to June 1971 and May 1974 to December 1983, the test reveal that bidirectional causality, or feedback, exists between monthly observations on seasonally unadjusted consumer and wholesale price changes. The finding of bidirectional causality corroborates other empirical evidence suggesthing that a simultaneous equation approach represents the appropriate way to estimate a bivariate model that consists of consumer and wholesale prices.     

Public Sector Rationing and Private Sector Selection

We study the interaction between nonprice public rationing and prices in the private market. Under a limited budget, the public supplier uses a rationing policy. A private firm may supply the good to those consumers who are rationed by the public system. Consumers have different amounts of wealth, and costs of providing the good to them vary. We consider two regimes. First, the public supplier observes consumers’ wealth information; second, the public supplier observes both wealth and cost information. The public supplier chooses a rationing policy, and, simultaneously, the private firm, observing only cost but not wealth information, chooses a pricing policy. In the first regime, there is a continuum of equilibria. The Pareto dominant equilibrium is a means‐test equilibrium: poor consumers are supplied while rich consumers are rationed. Prices in the private market increase with the budget. In the second regime, there is a unique equilibrium. This exhibits a cost‐effectiveness rationing rule; consumers are supplied if and only if their cost–benefit ratios are low. Prices in the private market do not change with the budget. Equilibrium consumer utility is higher in the cost‐effectiveness equilibrium than the means‐test equilibrium.     

Aid,non‐traded goods,and growth

Abstract We examine the effects of foreign aid in a small recipient country with two traded goods, one non‐traded good, and two factors. Learning by doing and intersectoral knowledge spillovers contribute to endogenous growth. We obtain two main results. First, a permanent increase in untied aid raises (or lowers) the growth rate if and only if the non‐traded good is more capital intensive (or effective labour intensive) than the operating traded good. Second, a permanent increase in untied aid raises welfare if the non‐traded good is more capital intensive than the operating traded good; otherwise, it may raise or lower welfare.     

Relative prices and the demand for money

This paper examines the validity of the conventional specification of money demand with particular reference to the issue of relative prices. It is shown that the conventional money demand function is based on the assumption of weak separability of money from commodities, which forms the basis for the absence of relative prices in money demand. Empirical and presumptive evidence suggests that weak separability is not tenable, implying that relative prices are important in money demand. The inclusion of commodity prices in money demand significantly affects the interest and income elasticity estimates. Finally, it is noted that the aggregate consumption function excluding commodity prices also has no theoretical and empirical base.     

Testing for causality between prices and money

The test for a causal relationship proposed byHaugh [1976] is considered in the context of the relationship between prices and money supply. The application of the test to 10 Latin American countries leads to the hypothesis of independence between the series being not rejected. Criticisms of the test are then discussed.     

Long-term impacts of import prices on domestic prices and wages

Zusammenfassung Anhand österreichischer Quartalsdaten wurde untersucht, ob zwischen Preisen, Reallöhnen, Importpreisen und anderen Variablen kointegrierende Beziehungen bestehen. Da für die untersuchten Zeitreihen mehrere Kointegrationsvektoren gefunden wurden, ergab sich ein Interpretationsproblem. In dieser Arbeit wurde der Kointegrationsraum auf eine Weise transformiert, die es ermöglichte, die Kointegrationsvektoren als Long-run-Multiplikatoren zu interpretieren und daher die langfristigen Auswirkungen einer Importpreiserhöhung auf das heimische Lohn- und Preisniveau zu untersuchen. (Der Anhang beschäftigt sich mit der Frage, unter welchen Voraussetzungen solch eine kausale Interpretation möglich ist.) Die geschätzten Effekte erwiesen sich als numerisch sehr bedeutend — sie liegen etwas höher als in anderen vergleichbaren empirischen Studien — und gegenüber einer Änderung der Auswahl der Variablen als sehr robust.

---

---

I wish to thank H. Abele, E. Dockner, H. Klausinger, K. Neusser and three anonymous referees for many helpful comments and suggestions.     

Housing prices,stock prices and the US economy

This paper studies the relationship between housing prices, stock prices, interest rates and aggregate output in the US using monthly data from 1993 to 2014. Evidence from causality tests and a variance decomposition procedure suggest that stock prices have a much larger effect on aggregate output in the US economy than do either housing prices or interest rates. Instead, the wealth effect created by changes in stock prices has a relatively large impact on US aggregate output. Separate estimations and variance decompositions for the sample periods 1993–2001, 2002–2008 and 2009–2014 show that the impact of housing prices relative to stock prices has been waning over time.     

Death and prices

Most experts agree that alcohol abuse has been a major cause of Russia’s soaring mortality rate. But why have ever more Russians been drinking themselves to death? Some attribute this to despair in the face of painful economic change. I present evidence that, in fact, the surge in alcohol‐related deaths – and premature deaths in general – was fuelled by a dramatic fall in the real price of vodka, which dropped 77 percent between December 1990 and December 1994. Variation in vodka prices – both over time and across Russia’s regions – closely matches variation in mortality. Although market competition and weak excise collection help explain the fall in prices, the main reason appears to be populist price regulation during inflationary periods.     

Scarcity and prices

A complete set of definitions of scarcity and some theorems on the relationship between competitive prices and scarcity of commodities are introduced. Competitive prices do not always represent signals of scarcity. Anyway under the hypothesis of monotonic preferences scarce commodities have positive prices, and when all commodities are both normal and gross substitutes, prices are indices of relative scarcity. Consequently, the connection between scarcity and prices is not an absolute foundation of economic theory.     

Asset pricing with time-varying betas for stocks traded on S&P 500

This study uses a novel approach for capturing time variation in betas whose pattern is treated as a function of market returns. A two-factor model (TFM) is constructed using estimated coefficients of a nonlinear regression. The model is tested against the CAPM and the Fama and French three-factor model in the context of time series regressions. The used stocks are traded on S&P 500. The period spans from 1993 to 2011. The time series regression results depict the superiority of the TFM in explaining portfolio returns including momentum ones. We also provide evidence that the particular portfolios employed at the construction of the new model accommodate different fundamental characteristics and different risk levels.     

Discount rates and shadow prices for public investment

This paper extends the Harberger–Sandmo–Drèze model for public discount rates to a many-good economy. It derives a formula for discount rates which are specific to each public enterprise or agency and used by them to discount future outputs and inputs evaluated at market prices. Such an approach is shown to be more efficient than that of simply using a single rate for all public projects. It is also more practical than asking each public firm to use second-best shadow prices in their analyses of investment projects.The general results are first provided; then, simple cases are considered and numerical examples presented to help interpret our formula and analyse its main determinants.     

A monotonicity law for relative prices

Summary It is shown that relative prices of production, which depend on the rate of profit in a complicated manner, satisfy nevertheless a simple monotonicity law when the Hilbert's projective metric is used as a measure.