Oil Price Volatility and the Role of Speculation

Oil Price Volatility and the Role of Speculation
Author: Samya Beidas-Strom
Publisher: International Monetary Fund
Total Pages: 34
Release: 2014-12-12
Genre: Business & Economics
ISBN: 1498333486

How much does speculation contribute to oil price volatility? We revisit this contentious question by estimating a sign-restricted structural vector autoregression (SVAR). First, using a simple storage model, we show that revisions to expectations regarding oil market fundamentals and the effect of mispricing in oil derivative markets can be observationally equivalent in a SVAR model of the world oil market à la Kilian and Murphy (2013), since both imply a positive co-movement of oil prices and inventories. Second, we impose additional restrictions on the set of admissible models embodying the assumption that the impact from noise trading shocks in oil derivative markets is temporary. Our additional restrictions effectively put a bound on the contribution of speculation to short-term oil price volatility (lying between 3 and 22 percent). This estimated short-run impact is smaller than that of flow demand shocks but possibly larger than that of flow supply shocks.

Oil Price Volatility and the Role of Speculation

Oil Price Volatility and the Role of Speculation
Author: Samya Beidas-Strom
Publisher: International Monetary Fund
Total Pages: 34
Release: 2014-12-12
Genre: Business & Economics
ISBN: 1498303846

How much does speculation contribute to oil price volatility? We revisit this contentious question by estimating a sign-restricted structural vector autoregression (SVAR). First, using a simple storage model, we show that revisions to expectations regarding oil market fundamentals and the effect of mispricing in oil derivative markets can be observationally equivalent in a SVAR model of the world oil market à la Kilian and Murphy (2013), since both imply a positive co-movement of oil prices and inventories. Second, we impose additional restrictions on the set of admissible models embodying the assumption that the impact from noise trading shocks in oil derivative markets is temporary. Our additional restrictions effectively put a bound on the contribution of speculation to short-term oil price volatility (lying between 3 and 22 percent). This estimated short-run impact is smaller than that of flow demand shocks but possibly larger than that of flow supply shocks.

Food Price Volatility and Its Implications for Food Security and Policy

Food Price Volatility and Its Implications for Food Security and Policy
Author: Matthias Kalkuhl
Publisher: Springer
Total Pages: 620
Release: 2016-04-12
Genre: Business & Economics
ISBN: 3319282018

This book provides fresh insights into concepts, methods and new research findings on the causes of excessive food price volatility. It also discusses the implications for food security and policy responses to mitigate excessive volatility. The approaches applied by the contributors range from on-the-ground surveys, to panel econometrics and innovative high-frequency time series analysis as well as computational economics methods. It offers policy analysts and decision-makers guidance on dealing with extreme volatility.

Irreversibility, Uncertainty, and Investment

Irreversibility, Uncertainty, and Investment
Author: Robert S. Pindyck
Publisher: World Bank Publications
Total Pages: 58
Release: 1989
Genre: Capital investments
ISBN:

Irreversible investment is especially sensitive to such risk factors as volatile exchange rates and uncertainty about tariff structures and future cash flows. If the goal of macroeconomic policy is to stimulate investment, stability and credibility may be more important than tax incentives or interest rates.

The Economics of Food Price Volatility

The Economics of Food Price Volatility
Author: Jean-Paul Chavas
Publisher: University of Chicago Press
Total Pages: 394
Release: 2014-10-14
Genre: Business & Economics
ISBN: 022612892X

"The conference was organized by the three editors of this book and took place on August 15-16, 2012 in Seattle."--Preface.

Global Implications of Lower Oil Prices

Global Implications of Lower Oil Prices
Author: Mr.Aasim M. Husain
Publisher: International Monetary Fund
Total Pages: 41
Release: 2015-07-14
Genre: Business & Economics
ISBN: 151357227X

The sharp drop in oil prices is one of the most important global economic developments over the past year. The SDN finds that (i) supply factors have played a somewhat larger role than demand factors in driving the oil price drop, (ii) a substantial part of the price decline is expected to persist into the medium term, although there is large uncertainty, (iii) lower oil prices will support global growth, (iv) the sharp oil price drop could still trigger financial strains, and (v) policy responses should depend on the terms-of-trade impact, fiscal and external vulnerabilities, and domestic cyclical position.

Global Uncertainty and the Volatility of Agricultural Commodities Prices

Global Uncertainty and the Volatility of Agricultural Commodities Prices
Author: B.R. Munier
Publisher: IOS Press
Total Pages: 256
Release: 2012-04-24
Genre: Business & Economics
ISBN: 1614990379

The recent global financial crisis exposed the serious limitations of existing economic and financial models. Not only did macro models fail to predict the crisis, they seemed incapable of explaining what was happening to the economy. Policymakers felt abandoned by the conventional tools of the now obsolete Washington consensus and the World Trade Organization’s oversimplified faith in free markets.The traditional models for agricultural commodities have so far failed to take into account the uncertain character of the global agricultural economy and its ferocious consequences in food price volatility, the worst in 300 years, yielding hunger riots throughout the world. This book explores the elements which could help to close this fundamental modeling gap. To what extent should traditional models be questioned regarding agricultural commodities? Are prices on these markets foreseeable? Can their evolution be either predicted or convincingly simulated, and if so, by which methods and models? Presenting contributions from acknowledged experts from several countries and backgrounds – professors at major international universities or researchers within specialized international organizations – the book concentrates on four issues: the role of expectations and capacity of prediction; policy issues related to development strategies and food security; the role of hoarding and speculation and finally, global modeling methods. The book offers a renewed wisdom on some of the core issues in the world economy today and puts forward important innovations in analyzing these core issues, among which the modular modeling design, the Momagri model being a seminal example of it. Reading this book should inspire fruitful revisions in policy-making to improve the welfare of populations worldwide.

Commodity Price Dynamics

Commodity Price Dynamics
Author: Craig Pirrong
Publisher: Cambridge University Press
Total Pages: 239
Release: 2011-10-31
Genre: Business & Economics
ISBN: 1139501976

Commodities have become an important component of many investors' portfolios and the focus of much political controversy over the past decade. This book utilizes structural models to provide a better understanding of how commodities' prices behave and what drives them. It exploits differences across commodities and examines a variety of predictions of the models to identify where they work and where they fail. The findings of the analysis are useful to scholars, traders and policy makers who want to better understand often puzzling - and extreme - movements in the prices of commodities from aluminium to oil to soybeans to zinc.