Producer price adjustment to commodity price shocks: An application of threshold cointegration

During the 1980s and 1990s, most developing countries in Sub-Saharan Africa and Latin America implemented structural adjustment reforms, which included the liberalization of export crop markets and the abolition of marketing boards. The emergence of new marketing systems may have altered price transmission mechanisms, especially if collusion behaviors have appeared among domestic stakeholders along the marketing chain. I use threshold cointegration tools to analyze the dynamics of world price transmission to coffee growers in three deregulated markets. The methods I use allow me to test the presence of a threshold in both the cointegrating relationship and its corresponding error correction model. Over the pre-reform period, I detect asymmetric price adjustments that appear favorable to producers - deviations from the long-run equilibrium resulting from largest increases in world prices being eliminated relatively quickly - and disappear in the post-reform period. On the contrary over the post-reform period, the results suggest that largest decreases in world prices may be transmitted relatively quickly to growers. These results can be seen as expressions of a favorable pricing policy over the pre-reform period and an unfavorable influence of new private agents over the post-reform period, meaning that in some cases reforms may have failed to create competitive market structures.     

The sectorial impact of commodity price shocks in Australia

This study reports that commodity price shocks predominantly affect the mining, construction and manufacturing industries in Australia. However, the financial and insurance sectors are found to be relatively unaffected. Mining industry profits and nominal output substantially increase in response to commodity price shocks. Construction output is also found to increase significantly, especially in response to a bulk commodity shock, as a result of increased demand for resource related construction. Increased demand for construction has a positive spillover effect to the parts of the manufacturing industry that supply the construction sector with intermediate inputs, such as the non-metallic mineral sub-industry. In contrast, other manufacturing sub-industries with only tenuous links to the resources sector such as textiles, clothing and other manufacturing, are relatively unresponsive to commodity price shocks.     

商品价格决定中劳动、效用、商品价格三者关系研究

许多研究者(如马歇尔等)都认为,商品价格是由效用、劳动(生产成本)共同决定的。但商品价格决定中,效用、劳动(生产成本)、商品价格三者间的关系,还有待进一步研究。文章指出,如果选择合适的效用的定义,那么,在完全竞争市场、劳动工资率相同等条件下,商品价格可视为是由效用、劳动(生产成本)共同决定的,并且还存在效用、劳动(生产成本)共同决定商品价格的价格公式。     

The futures price of a commodity in fixed supply

This letter shows that in a general equilibrium model of homogeneous population with production risk, the futures price of a commodity which is in fixed supply is always below the expected futures spot price (e.g., normal backwardation). It also shows that the difference between the futures price and the expected spot price increases as the representative individual's risk aversion rises. An important application of this model is to the housing market since houses are in fixed supply in the short run and buying a house is like holding a long position in a forward contract. Therefore, if population is homogeneous, houses are not a good consumption hedge and the prices of houses are below their expected rental prices.     

Understanding and forecasting aggregate and disaggregate price dynamics

There are doubts regarding the empirical benefits of forecast aggregation. Theoretical research clearly supports forecast aggregation but conflicting results exist in the empirical literature. We search the literature for empirical regularities. One important issue often cited is estimation error and papers which are unsupportive of forecast aggregation often have short spans of data. A second empirical regularity is that researchers frequently use a relatively small number of disaggregates. Our work finds that the greatest benefits to aggregation are realised when a large number of disaggregates are used. This is a natural consequence of the theoretical results. A second critical issue in forecast aggregation is model selection. We suggest a simple guide to model choice based on the empirical properties of the data. In this regard, the extent of comovements between the constituent series determines model choice.     

A comparison of first price multi-object auctions

We compare simultaneous multi-object English-type ascending price auctions with first price sealed bid auctions in private values environments with multi-object demands. Special attention is paid to the effect of closing rules on ascending auctions’ outcomes. We find that simultaneous ascending auctions with the soft closing rule are the most efficient, while the sealed bid auctions generate the highest revenue. Ascending auctions with the hard closing rule display a significant amount of late bidding, resulting in the lowest among the three institutions revenue and efficiency.

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A key determinant of commodity price Co-movement: The role of daily market liquidity

Daily price co-movement across different commodity classes and its key determinant are investigated in this paper. Using co-integration and Granger causality analysis, we identify a common liquidity factor which drives prices of five commodities (oil, silver, gold, corn, live cattle) to move along a common trend. When the market becomes more (less) liquid, all commodity prices tend to move up (down) in the same direction. As a result, such liquidity-driven price co-movement across different commodity classes is likely to generate aggregate price shocks and amplify inflation volatility. As a practical implication of our findings, policy makers ought to be able to draw valuable lessons from monitoring daily commodity liquidity dynamics as a timely bellwether for incipient inflation and to more effectively control inflation risk.     

Futures basis,inventory and commodity price volatility: An empirical analysis

We employ a large dataset of physical inventory data on 21 different commodities for the period 1993–2011 to empirically analyze the behavior of commodity prices and their volatility as predicted by the theory of storage. We examine two main issues. First, we analyze the relationship between inventory and the shape of the forward curve. Low (high) inventory is associated with forward curves in backwardation (contango), as the theory of storage predicts. Second, we show that price volatility is a decreasing function of inventory for the majority of commodities in our sample. This effect is more pronounced in backwardated markets. Our findings are robust with respect to alternative inventory measures and over the recent commodity price boom.     

The China factor in recent global commodity price and shipping freight volatilities

This paper attempts an investigation of the impact of the China factor on the global commodity and ocean shipping freight volatilities in recent years. It measures China's contribution to the incremental growth in demand for selected bulk commodities and ocean shipping in the world. China's impact on price volatilities is statistically analyzed through a conventional econometric framework.     

A panel stationarity test with gradual structural shifts: Re-investigate the international commodity price shocks

This paper proposes a simple panel stationarity test which takes into account structural shifts and cross-section dependency. Structural shifts are modelled as gradual/smooth process with a Fourier approximation. The so-called Fourier panel stationarity test has a standard normal distribution. The Monte Carlo simulations indicate that (i) if the error terms are i.i.d, the test shows good size and power properties even in small samples; and (ii) if the error terms are serially correlated, the test has reasonable size and high power. We re-examine the behavior of the international commodity prices and find out an evidence on the persistence of shocks.     

Technology forecasting for commodity projections: A case study on the effect of substitution by aluminum on the future demand for copper

This paper deals with the possible use of technology forecasting in commodity projection and, to a lesser extent, in resource allocation for research and development. As a specific example, technology forecasting was used to estimate the effect of substitution of copper by aluminum on the future demand of copper in 1980 and 1990. and to identify a future technology for extracting aluminum from clay; a technology which could be especially useful in the developing countries. Basic predictions were made for functional units of the major common end uses of copper and aluminum in 1980 and 1990, including electrical conductor and heat exchanger applications. The amounts of copper required in each application in 1980 and 1990 were estimated for three substitution scenarios. In the first of these, substitution is assumed to take place according to a logistic type function, resulting in a predicted copper demand of 3.70 million tons in 1980 and 4.91 million tons in 1990. In the second scenario, substitution is assumed to progress at past linear rates, resulting in a predicted copper demand of 4.3 million tons in 1980 and 6.41 million tons in 1990. In the third scenario, no further substitution is assumed, resulting in a predicted copper demand of 4.81 million tons in 1980 and 7.77 million tons in 1990. The effective date of the technology monitoring that produced these predictions is July 1974, and the predictions are current as of the date. The then current forecasts for copper demand made by the U.S. Bureau of Mines and other agencies using compound growth and regression models, corresponded to the unlikely scenario of no further substitution, and therefore needed correction in view of these anticipated technological changes.     

Primary commodity price fluctuations and developing countries: An econometric model of copper and Zambia

Most of the literature on commodity price fluctuations and their impact on development has been based on cross-country data and aggregated export earnings. The results have been inconclusive, largely because the analysis fails to recognize the importance of country and commodity differences. This paper isolates a single commodity, copper, and a single country, Zambia, which copper export earnings loom large in the economy. It then presents an econometric model of the country, consisting of a disaggregated copper export sector with links to a macro model of the whole economy. Fluctuations in export prices around a smooth trend are then simulated, and their impact on the non-export sectors observed through such a development indicators as exployment levels, GDP levels and growth rates, general price levels and final demand.     

The demise of commodity price agreements: the role of exchange rates and special interests

We derive the equilibrium joint distribution of exchange rate and commodity price in a two-country rational expectations model. The correlation between commodity price and exchange rate appears crucial for the stability of commodity markets. This result arises from the common practice to quote commodity prices in consuming countries' currency, which subjects producing countries to the currency risk. Welfare results of commodity price stabilization are obtained and facilitate the interpretation of the position taken by industrialized countries long opposed to international commodity agreements. We apply our model to the Philippines and investigate the potential effects of the International Sugar Agreement (ISA) on the various conditional volatilities of the model. We conclude on the relative ineffectiveness of these agreements in limiting fluctuations of sugar prices.     

Macroeconomic volatility and anti-refugee violence in developing countries: Evidence from commodity price shocks

I investigate the effect of macroeconomic (output) volatility on anti-refugee violence in developing countries. Opportunity cost, rapacity, and state capacity theories predict ambiguous effects. For causal inference I leverage output volatility caused by plausibly exogenous commodity price shocks. I find that adverse commodity price shocks increase both violence of natives against refugees and violence between refugees. My results suggest that anti-refugee violence increases during recessions and decreases during economic booms.     

Effects of the agricultural commodity and the food price volatility on economic integration: an empirical assessment

This paper empirically examines the effects of the global agricultural commodity price volatility and the food price volatility on the level of economic in     

Uniform price auctions and fixed price offerings in IPOs: an experimental comparison

We compare uniform price auctions with fixed price offerings in Initial Public Offerings (IPO) using laboratory experiments. The experimental environment is based on the Biais and Faugeron-Grouzet (J. Financ. Intermed. 11:9–36, 2002) model. Standard predictions based on tacit collusion equilibria (TCE) suggest lower revenues in uniform price auctions, although alternative equilibria allow for higher revenues. In our experiment, there is no evidence that TCE are played. The experiment suggests that the uniform price auctions are superior to fixed price offerings in terms of raising revenues.

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Indexation of UNCTAD core commodity prices by buffer stocks or export quotas?: A comparison of the benefits for two developing economies

General equilibrium models are used to study the resource allocative and income implications for the Ivory Coast and Kenya of indexation of agricultural commodity prices. Two indexation methods are investigated, (i) buffer stock transactions, and (ii) export quota entitlements. The results suggest that there are efficiency losses associated with the buffer stock option which reduce the GDP gains below that indicated by the pure terms of trade gains. Efficiency gains associated with the export quota method however result in GDP increases above those indicated by the pure terms of trade gains.     

Strategic use of futures and options by commodity processors

The impacts of input–output price relationships on end-users' demands for positions in futures and options are analyzed using a mean-variance portfolio model and applied to price risk management in the bread manufacturing industry. A production relationship was assumed between the input and resultant output, and correlation between the input and output prices were introduced into the portfolio model. The optimal hedge ratio can be either positive or negative depending upon the relationship between the input and output price standard deviation adjusted for production technology and input–output price correlation. Introduction of a call option into the portfolio (in addition to the futures) does not change the hedging demand for futures; however, the speculative component changes. The results show that the addition of input–output linear production and price correlation relationships would not justify a hedging role for options unless there is bias in the futures and/or options markets.