This study examines volatility transmission between oil and selected agricultural commodity prices (wheat, corn, soybeans, and sugar). We apply the newly developed causality in variance test and ...impulse response functions to daily data from 01 January 1986 to 21 March 2011. In order to identify the impact of the food price crisis, the data are divided into two sub-periods: the pre-crisis period (01 January 1986 to 31 December 2005) and the post-crisis period (01 January 2006–21 March 2011). The variance causality test shows that while there is no risk transmission between oil and agricultural commodity markets in the pre-crisis period, oil market volatility spills on the agricultural markets —with the exception of sugar —in the post-crisis period. The impulse response analysis also indicates that a shock to oil price volatility is transmitted to agricultural markets only in the post-crisis period. This paper thereby shows that the dynamics of volatility transmission changes significantly following the food price crisis. After the crisis, risk transmission emerges as another dimension of the dynamic interrelationships between energy and agricultural markets.
► We find that there is no volatility spillover between oil and agricultural commodity markets before food price crisis. ► We find that oil volatility transmits to wheat, corn, and soybeans markets after the food price crisis ► We find that sugar is neutral to oil market risk both before and after the crisis.
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GEOZS, IJS, IMTLJ, KILJ, KISLJ, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UL, UM, UPCLJ, UPUK
Maintaining price stability is crucial for meaningful economic growth. However, while policymakers tend to remove some energy incentives when the oil price decreases to moderate fiscal pressure, a ...decrease in oil price interacts with the exchange rate depreciation in the oil exporting country. This is the first study that examines the asymmetric impact of both oil price and exchange rate on the disaggregate price inflation in Indonesia, Malaysia, and Thailand. Given that each country has its own economic structure, the impact of oil price and exchange rate fluctuation on the price level may differ across the countries. We find that an increase in oil price has a greater impact on the producer price index (PPI) than the consumer price index (CPI) in all countries. However, a decrease in the oil price is only significant in reducing both CPI and PPI in Thailand. Moreover, an increase in the exchange rate (currency depreciation) is significant in causing an increase in both the CPI and PPI in all countries. However, a decrease in the exchange rate (currency appreciation) failed to reduce both the CPI and PPI in all countries. We recommend that policymakers continue their energy incentive programs, however, the distribution of the energy incentive should be improved to ensure that the benefit reaches the targeted group.
•We explore the asymmetric impact of oil price and exchange rate respectively on inflation.•An increase in oil price gives greater impact on PPI than CPI.•An increase in exchange rate is significant to cause an increase in both CPI and PPI.•We recommend the policymakers to continue their energy incentive programs.•Strengthening monetary policy and increase their efficiency are also recommended.
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GEOZS, IJS, IMTLJ, KILJ, KISLJ, NLZOH, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UILJ, UL, UM, UPCLJ, UPUK, ZAGLJ, ZRSKP
33.
The “Cotton Problem” Baffes, John
The World Bank research observer,
03/2005, Volume:
20, Issue:
1
Journal Article
Open access
Cotton is an important cash crop in many developing economies, supporting the livelihoods of millions of poor households. In some countries it contributes as much as 40 percent of merchandise exports ...and more than 5 percent of GDP. The global cotton market, however, has been subject to numerous policy interventions, to the detriment of nonsubsidized producers. This examination of the global cotton market and trade policies reaches four main conclusions. First, rich cotton-producing countries should stop supporting their cotton sectors; as an interim step, transfers to the cotton sector should be fully decoupled from current production decisions. Second, many cotton-producing (and often cotton-dependent) developing economies need to complete their unfinished reform agenda. Third, new technologies, especially genetically modified seed varieties, should be embraced by developing economies; this would entail extensive research to identify varieties appropriate to local growing conditions and the establishment of the proper legislative and regulatory framework. Finally, cotton promotion is needed to reverse or at least arrest cotton's decline as a share of total fiber consumption.
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Prices tend to remain constant for a period of time and then jump. In the literature, this "rigidity" is usually interpreted to reflect a cost of adjusting prices. This article shows that price ...rigidity can alternatively reflect optimal price setting when there are no adjustment costs, namely, if the seller is rationally inattentive. The model generates non-trivial pricing patterns that are consistent with the data and that are hard to explain with the traditional adjustment-cost model. In particular, prices are adjusted frequently but move back and forth between a few given values, hazard functions are downward sloping, and responses to persistent shocks are sluggish. These results are obtained in a model that implements rational inattention without simplifying assumptions on the functional forms of the processed signals.
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BFBNIB, INZLJ, IZUM, KILJ, NMLJ, NUK, PILJ, PNG, SAZU, UL, UM, UPUK, ZRSKP
Demand-side flexibility which reacts to hourly price signals is expected to play an essential role in balancing intermittent electricity generation in the future carbon-neutral power system. This ...study investigates the price responsiveness of households and various influencing factors through a pricing experiment which was implemented as a reward scheme and involved 3746 Norwegian households. These households, characterised by a highly electrified energy usage such as electric heating and charging electric cars, were subjected to variable hourly price signals with a one-day advance notification over the course of three winter months. The study reveals that households reduced their electricity demand by, on average, 2.92% in hours with high prices, and the reduction did not diminish significantly after repeated interventions. Moreover, an increased response could be observed for price signals with a short peak price period and when prices exceeded a threshold of 15 NOK/kWh. These results suggest that despite the limited potential of manual demand response from households, it can still be relied upon and utilised to enhance power system operations and planning. Additionally, to fully exploit its potential, it is recommended to enhance price responsiveness through tailored price information and by incentivising investments in automatic response and energy storage.
•Households can respond to price signals without automatic electricity management.•Manual response is persistent over time, with minor fatigue observed.•Pricing experiments may educate for long-term energy use behaviour changes.•Price response should be included in power system planning and demand prognoses.•Incentives for increased demand flexibility and price responsiveness needed.
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GEOZS, IJS, IMTLJ, KILJ, KISLJ, NLZOH, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UILJ, UL, UM, UPCLJ, UPUK, ZAGLJ, ZRSKP
The present study examines the decomposition of relative price variability into two components (i.e., inflationary and real factors) in India using monthly data on 105 commodities prices over the ...period January 2005 to March 2017. The analysis of the study revealed that under primary food articles, 53% of relative price variability is due to real factors, and the remaining 47% due to inflationary factors. Whereas for manufactured food products, 30% of relative price variability is due to real factors, and the rest of the 70% due to inflationary factors. Overall, the important conclusion that emerges from the analysis is that few commodity prices have a larger contribution to relative price variability in the food basket. The majority of commodity prices under primary food articles have a larger contribution to variability in relative price changes, whereas under manufactured food products have the least contribution. Moreover, this study also accounts for wholesale price index and consumer price index non-food commodities to identify to which extent relative price variability is determined by real and inflationary factors.
JEL Classifications: E30, E31, Q11, L66
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NUK, OILJ, SAZU, UKNU, UL, UM, UPUK
We study the impact of large exchange rate devaluations on the cost of living at different points on the income distribution. Poor households spend relatively more on tradeable product categories and ...consume lower-priced varieties within categories. Changes in the relative price of tradeables and of lower-priced varieties affect the cost of living of low-income relative to high-income households. We quantify these effects following the 1994 Mexican devaluation and show that they can have large distributional consequences. Two years post-devaluation, the cost of living for the bottom income decile rose 1.48 to 1.62 times more than for the top income decile.
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BFBNIB, CEKLJ, INZLJ, IZUM, KILJ, NMLJ, NUK, ODKLJ, PILJ, PNG, SAZU, UL, UM, UPUK, ZRSKP
We assess the impact of quantile price movements in oil, gas, coal and electricity on the quantiles of clean energy stock returns using a multivariate vine-copula dependence setup. For the period ...2009–2016, our evidence shows that oil and electricity prices were major contributors to the dynamics of clean energy stock returns in the USA and the EU, respectively, whereas the other energy prices played a minor role in shaping clean energy stock returns. Furthermore, we find evidence of a symmetric energy price impact, so extreme upward and downward energy price movements had a similar impact on clean energy stock returns. This evidence has potential implications for risk management decision making by energy investors and for policy maker decisions regarding support for clean energy deployment.
•We study the impact of energy price movements on clean energy stock returns.•We used a multivariate vine-copula dependence setup.•Oil was crucial in shaping clean energy stock returns in the USA.•Electricity was crucial in shaping clean energy stock returns in the EU.•Extreme energy price movements had a symmetric impact on clean energy stock returns.
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GEOZS, IJS, IMTLJ, KILJ, KISLJ, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UL, UM, UPCLJ, UPUK
This paper examines how pre-tax petrol and diesel prices in New Zealand respond to changes in crude oil prices using an asymmetric error correction model. Our results show that oil companies adjust ...diesel prices upwards faster than they adjust them downwards, and the difference is statistically significant. However we find no statistical evidence for an asymmetry in the adjustment of petrol prices even though the magnitude of estimated coefficients suggests a faster response to rising prices. As diesel pricing is not as competitive as petrol pricing, calls for further government actions and monitoring of the oil market may be justified. Our findings also have important implications for the conduct of monetary policy as the pass-through of crude oil price changes can affect cost-push inflation.
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GEOZS, IJS, IMTLJ, KILJ, KISLJ, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UL, UM, UPCLJ, UPUK
This research examines the long-run relationship between the spot oil price and retail and wholesale gasoline prices. Recent research suggests that the response of the retail gasoline price is faster ...and the size of the change is larger, in magnitude, following a crude oil price increase compared with periods when the crude oil price is falling; however, some recent papers examining potential asymmetries present mixed results. Our results from a common threshold model estimating the adjustment of gasoline prices and the spot oil price suggest a long-run relationship between retail and wholesale gasoline prices and the crude oil price. Further, results here suggest that both retail and wholesale gasoline prices respond symmetrically to an oil price shock in the long run, indicating little market power by gas stations and wholesalers.
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GEOZS, IJS, IMTLJ, KILJ, KISLJ, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UL, UM, UPCLJ, UPUK
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