The impact of uncertainty shocks on the volatility of commodity prices

This paper examines the world commodity prices pass-through to food inflation in Morocco, over the period 2004-2018, by using Structural Vector Autoregression (SVAR) model on monthly data. Several interesting results are found from this study. First, the impact of global food prices on domestic food inflation is shown significant, which reflects the large imported component in the domestic food consumption basket. Second, the transmission effect is found to vary across commodities. Consumer prices of cereals and oils significantly and positively respond to external price shocks, while those of dairy and beverages are weakly influenced. Third, there is evidence of asymmetries in the pass-through from world to domestic food prices, where external positive shocks generate a stronger local prices response than negative ones. This situation is indicative of policy and market distortions, namely the subsidies, price controls, and weak competitive market structures. Our findings suggest that food price movements should require much attention in monetary policymaking, especially that the country has taken preliminary steps towards the adoption of floating exchange rate regime.

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A Reappraisal of the Prebisch-Singer Hypothesis Using Wavelets Analysis

Journal of Risk and Financial Management ◽

10.3390/jrfm14070319 ◽

2021 ◽

Vol 14 (7) ◽

pp. 319

Author(s):

Hany Fahmy

Keyword(s):

International Trade ◽

Structural Breaks ◽

Developing Economies ◽

Commodity Prices ◽

Commodity Price ◽

Data Set ◽

Price Series ◽

Long Run ◽

Starting Point ◽

The Impact

The Prebisch-Singer (PS) hypothesis, which postulates the presence of a downward secular trend in the price of primary commodities relative to manufacturers, remains at the core of a continuing debate among international trade economists. The reason is that the results of testing the PS hypothesis depend on the starting point of the technical analysis, i.e., stationarity, nonlinearity, and the existence of structural breaks. The objective of this paper is to appraise the PS hypothesis in the short- and long-run by employing a novel multiresolution wavelets decomposition to a unique data set of commodity prices. The paper also seeks to assess the impact of the terms of trade (also known as Incoterms) on the test results. The analysis reveals that the PS hypothesis is not supported in the long run for the aggregate commodity price index and for most of the individual commodity price series forming it. Furthermore, in addition to the starting point of the analysis, the results show that the PS test depends on the term of trade classification of commodity prices. These findings are of particular significance to international trade regulators and policymakers of developing economies that depend mainly on primary commodities in their exports.

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Un modèle de projection des prix utilisant les relations intersectorielles de l’économie canadienne

L Actualité économique ◽

10.7202/800606ar ◽

2009 ◽

Vol 51 (1) ◽

pp. 71-85

Author(s):

R. Rioux

Keyword(s):

Commodity Prices ◽

Price Formation ◽

Input Output ◽

Price Model ◽

Primary Input ◽

Time Period ◽

Statistics Canada ◽

The Impact ◽

Push Model ◽

Input Prices

This paper describes a simple cost-push price model which has been developed at the Structural Analysis Division of Statistics Canada. This price model is a traditional input/output cost-push model which has been adapted to utilize the rectangular industry by commodity input/output tables for Canada. It can be considered as the "dual" of the output model. Instead of analysing the propagation of demand through the economic system, the price model serves to analyse the propagation of factor prices throughout the system. The purpose of such a price formation model is to determine the impact on industry selling prices and domestic commodity prices arising from a change in impart commodity prices and primary input prices. This price model is of a static type; it accepts no substitutions and its structure is quite rigid. It is considered as being an annual model although it can be used for a different time period. This model is fully operational and is widely used by many government and private agencies.

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Unified Assessment of Unconventional Resource Plays – Implications for Global Exploration and Development

10.2118/205140-ms ◽

2021 ◽

Author(s):

Tarun Grover ◽

Jamie Stuart Andrews ◽

Irfan Ahmed ◽

Ibnu Hafidz Arief

Keyword(s):

Commodity Prices ◽

Design Parameters ◽

First Year ◽

Well Productivity ◽

Well Spacing ◽

Cumulative Production ◽

Unconventional Resource ◽

Log Normal ◽

The Impact ◽

Sweet Spots

Abstract Unconventional resource plays, herein referred to as source rock plays, have been able to significantly increase the supply of hydrocarbons to the world. However, majority of the companies developing these resource plays have struggled to generate consistent positive cash flows, even during periods of stable commodity prices and after successfully reducing the development costs. The fundamental reasons for poor financial performance can be attributed to various reasons, such as; rush to lease acreage and drill wells to hold acreage, delayed mapping of sweet spots, slow acknowledgement of high geological variability, spending significant capital in trial and errors to narrow down optimal combinations of well spacing and stimulation designs. The objective of this paper is to present a systematic integrated multidisciplinary analysis of several unconventional plays worldwide which, if used consistently, can lead to significantly improved economics. We present an analysis of several unconventional plays in the US and Argentina with fluid systems ranging from dry gas to black oil. We utilize the publicly available datasets of well stimulation and production data along with laboratory measured core data to evaluate the sweet spots, the measure of well productivity, and the variability in well productivity. We investigate the design parameters which show the strongest correlation to well productivity. This step allows us to normalize the well productivity in such a way that the underlying well productivity variability due to geology is extracted. We can thus identify the number of wells which should be drilled to establish geology driven productivity variability. Finally, we investigate the impact of well spacing on well productivity. The data indicates that, for any well, first year cumulative production is a robust measure of ultimate well productivity. The injected slurry volume shows the best correlation to the well productivity and "completion normalized" well productivity can be defined as first year cumulative production per barrel of injected slurry volume. However, if well spacing is smaller than the created hydraulic fracture network, the potential gain of well productivity is negated leading to poor economics. Normalized well productivity is log-normally distributed in any play due to log-normal distribution of permeability and the sweet spots will generally be defined by most permeable portions of the play. Normalized well productivity is shown to be independent of areal scale of any play. We show that in every play analyzed, typically 20-50 wells (with successful stimulation and production) are sufficient to extract the log-normal productivity distribution depending on play size and target intervals. We demonstrate that once the log-normal behavior is anticipated, creation of production profiles with p10-p50-p90 values is quite straightforward. The way the data analysis is presented can be easily replicated and utilized by any operator worldwide which can be useful in evaluation of unconventional resource play opportunities.

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Assessing the impact of Covid-19 pandemic in Turkey with a novel economic uncertainty index

Journal of Economic Studies ◽

10.1108/jes-02-2021-0081 ◽

2021 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Erhan Mugaloglu ◽

Ali Yavuz Polat ◽

Hasan Tekin ◽

Edanur Kılıç

Keyword(s):

Industrial Production ◽

Explanatory Power ◽

Principal Component ◽

Intermediate Goods ◽

Economic Uncertainty ◽

Content Type ◽

Uncertainty Shocks ◽

Political Events ◽

Uncertainty Index ◽

The Impact

PurposeThis study aims to measure economic uncertainty in Turkey by a novel economic uncertainty index (EUI) employing principal component analysis (PCA). We assess the impact of Covid-19 pandemic in Turkey with our constructed uncertainty index.Design/methodology/approachIn order to obtain the EUI, this study employs a dimension reduction method of PCA using 14 macroeconomic indicators that spans from January 2011 to July 2020. The first principal component is picked as a proxy for the economic uncertainty in Turkey which explains 52% of total variation in entire sample. In the second part of our analysis, with our constructed EUI we conduct a structural vector autoregressions (SVAR) analysis simulating the Covid-19-induced uncertainty shock to the real economy.FindingsOur EUI sensitively detects important economic/political events in Turkey as well as Covid-19-induced uncertainty rising to extremely high levels during the outbreak. Our SVAR results imply a significant decline in economic activity and in the sub-indices as well. Namely, industrial production drops immediately by 8.2% and cumulative loss over 8 months will be 15% on average. The losses in the capital and intermediate goods are estimated to be 18 and 25% respectively. Forecast error variance decomposition results imply that uncertainty shocks preserve its explanatory power in the long run, and intermediate goods production is more vulnerable to uncertainty shocks than overall industrial production and capital goods production.Practical implicationsThe results indicate that monetary and fiscal policy should aim to decrease uncertainty during Covid-19. Moreover, since investment expenditures are affected severely during the outbreak, policymakers should impose investment subsidies.Originality/valueThis is the first study constructing a novel EUI which sensitively captures the critical economic/political events in Turkey. Moreover, we assess the impact of Covid-19-driven uncertainty on Turkish Economy with a SVAR model.

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Volatility Spillovers Arising from the Financialization of Commodities

Journal of Risk and Financial Management ◽

10.3390/jrfm11040072 ◽

2018 ◽

Vol 11 (4) ◽

pp. 72 ◽

Cited By ~ 2

Author(s):

Wing Chan ◽

Bryce Shelton ◽

Yan Wu

Keyword(s):

Commodity Prices ◽

Spillover Effects ◽

Realized Volatility ◽

Commodity Markets ◽

Exchange Traded Funds ◽

Volatility Transmission ◽

Volatility Spillovers ◽

The Difference ◽

Index Investment ◽

The Impact

This paper examines whether the proliferation of new index products, such as commodity-tracking exchange-traded funds (ETFs), amplified the volatility transmission channel introduced by financialization. This paper focuses on the volatility spillover effects among crude oil, metals, agriculture, and non-energy commodity markets. The results show financialization has an impact on the volatility of commodity prices, predominantly for non-energy commodities. However, the impact on volatility is not symmetric across all commodities. The analysis of index investment and investors’ positions in futures markets shows that, when a relationship exists, it is generally negatively correlated with the realized volatility of non-energy commodities. Using realized volatility in the difference-in-difference model provides estimates that are inconsistent with other findings that non-energy commodities, traded as a part of indices, have experienced higher volatility. The results are similar to the index investment and futures market analysis, where increased participation by investors through new investment products has put download pressure on realized volatility.

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The Impact of Uncertainty Shocks

10.3386/w13385 ◽

2007 ◽

Cited By ~ 17

Author(s):

Nicholas Bloom

Keyword(s):

Uncertainty Shocks ◽

The Impact

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An investigation on fuel carrier’s price rise impacts on the consumer price inflation in Iran

Current Alternative Energy ◽

10.2174/2405463104666210427112311 ◽

2021 ◽

Vol 04 ◽

Author(s):

Nima Norouzi

Keyword(s):

Consumer Price Index ◽

Commodity Prices ◽

Gasoline Prices ◽

Government Control ◽

Short Term ◽

Fuel Price ◽

Price Inflation ◽

Oil Derivatives ◽

The Impact

Introduction: Oil is one of the primary commodities of all countries globally and is, in essence, the energy base of all that we know as transportation. Therefore, price fluctuations of derivatives, especially fuel and oil derivatives, are the policymakers’ main concerns because they can cause serious problems, such as inflation in commodity prices. Objective: The impact of fuel carriers’ prices on the consumer price index remains a subject of debate and research. This paper aims to develop a model to define the inflation regime in Iran and then investigate the impact of gasoline and diesel price on the total inflation rate. Method: In this study, using the central bank time series and available data on energy balance and World Bank data banks, a non-linear distributed online delay regression modeling is developed to analyze the relationship between fuel price and essential commodity inflation. Results: The results show that there is an impact of gasoline price on inflation. It does not have much effect in the long term, but diesel can somewhat influence raising prices, which can exacerbate poverty in the community that needs special attention. Conclusion: It was also found that diesel’s price is harmful to the economy because it can stimulate inflation in the long term. However, in the short term, diesel does not cause any significant inflation in the prices. While gasoline prices can have many short-term social effects, this paper suggests that the Iranian government control diesel fuel prices prevent long-term inflation in inflation and consumer price rate.

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