Price Volatility

This study examines exchange rate determinants, drawing on Balassa (1964)'s critique of productivity oversight and guided by Gelb and Diofas (2016)'s framework, using the Big Mac Index as a proxy for purchasing power parity (PPP). Analysing data from 52 economies (2011)(2012)(2013)(2014)(2015)(2016)(2017)(2018)(2019) with a dynamic Generalized Method of Moments (GMM) estimator, it reveals that exchange rates are inversely associated with trade deficits, effective governance, and inflation, while positively correlating with income, economic size, and population density. These findings emphasise the complex interplay of various factors influencing exchange rates, providing policymakers and financial stakeholders with invaluable insights.

The impacts of market reforms on prices volatility in developing countries are not well understood because analysts have not been able to predict the impacts. This study investigates whether the reforms have exacerbated the degree of spatial volatility of maize price in Tanzania using ARCH-M model. Results indicate that developed regions might have experienced less volatile prices than less developed regions. Infrastructure development to increase the volume of trade between the regions is recommended.

Geometric analysis of iterated cross-volatilities of asset prices is adopted to assess the stability of the (risk-free) measure under infinitesimal perturbations. Perturbations of asset prices evolve through time according to an ordinary linear differential equation (hedged transfer). The decay (feedback) rate is explicitly computed through a Fourier series method implemented on high frequency time series.

The paper investigates price dynamics under market liberalization, with a focus on the effects of lowering price floors. We analyze price dynamics by specifying and estimating a dynamic Tobit model under time-varying volatility, where the market price is censored by a government-set support price. The model is applied to the U.S. butter market over the last three decades. The econometric results show how the price support program affects both expected prices and the volatility of prices. It is found that the censoring effects of a price support program can be significant and large even if the price support is set relatively low.

The creation of fully funded, privately managed pension systems may have significant positive direct effects on savings, growth and welfare. However, the indirect link, via capital market development, may be as important. This hypothesis is verified with evidence from emerging economies that have recently engaged in such reforms with a focus on Chile, Argentina and Peru. There is abundant qualitative and anecdotal evidence that relates pension reform with the accumulation of "institutional capital", with the existence of an adaptive legal framework, with increased specialization, transparency and integrity and even with better corporate governance. Evidence of increased financial innovation is also found while there is little evidence of bank disintermediation. In addition, time-series and panel data evidence is generally consistent with the following hypothetical effects: a reduction in the cost of capital; lower security-price volatility; and higher traded volumes. The evidence suggests that the indirect channel via capital market development may have important implications for economic growth and productivity.

Dryland farming is commonplace in Australia so the profitability of dryland farms often depends on the amount and timing of rainfall. With drier weather conditions featuring in climate change projections for southern Australia, it is important to understand the relationships between rainfall, commodity prices and farm profitability. Using correlated farm commodity and input prices from the past nine years, farm profitability was calculated for a range of farm types in southwest Victoria under low, average and high rainfall scenarios. Fourteen representative farms were examined that included production of Merino fine wool, prime lamb, beef cattle, milk, wheat and canola. This paper compares and contrasts the spread of profitability of these farms against the backdrop of price variability and rainfall scenarios. Inferences about the resilience to climate and price volatility of the different farm types are made. The type of metric used to describe profitability is shown to importantly...

Price volatility in the corn market has changed considerably globalization and stronger linkages to the energy complex. Using data from January 1989 through December 2009, we estimate and forecast the volatility in the corn market using futures daily prices. Estimates in a Fractional Integrated GARCH framework identify the importance of long memory, seasonality, and structural change. Recursively generated forecasts for up to 40-day horizons starting in January 2005 highlight the importance of seasonality, and long memory specifications which perform well at more distant horizons particularly with rising volatility. The forecast benefits of allowing for structural change in an adaptive framework are more difficult to identify except at more distant horizons after a large downturn in volatility.

We show that if a particular temporal relation exists between the option and spot markets, the implied volatility in option prices can be biased depending on the level of the true volatility. The higher the true volatility, the more upward (downward) biased the implied volatility will be, if the option market leads (lags) the spot market. Using intraday data of the S&P 500 index options, we show that the option market leads the spot market at least in the sample. More importantly, the implied volatility is biased due to the lead-lag relationship, and the bias is more profound when the market is more volatile.

Food is a necessity for human survival, and food price volatility has the potential to affect household consumption patterns and, as a result, it affects the manufacturing decisions of various firms. This study aims to address this dimension of food price volatility, and it examines how it affects the financial performance of the manufacturing sector through its demand and supply channels. It employs the SVAR Model to examine these impacts for monthly time series data from June 2008 to June 2023. The study revealed that for some industries, like engineering, petroleum, rubber, and textiles, food prices lead to an increase in demand. These results show a contradiction to the general consumer behavior theory. However, for the automobile industry, this theory holds firm, as food price shocks reduce the demand for automobiles. For industries like fertilizers, which are the inputproviding industry for food production, a positive food price shock boosts the supply. This study addresses a novel dimension of the effect of food price shocks, and goes beyond examining its impact on aggregate inflation, providing a policy guideline to relevant stakeholders for accurate analysis of the impact of these shocks. It will help to address the stability issues of the manufacturing sector of Pakistan and economic development and stability.

This paper views the economic growth experience in Morocco from the perspective of private firms. Using models of optimal firm size as a theoretical framework, the paper analyzes empirically the factors affecting the growth process of Moroccan private firms. The analysis is based on a field survey of 370 firms carried out under the auspices of the World Bank in 1998. The sample includes firms of different sizes, from more than 100 workers to 5 workers or fewer. It also covers all major economic sectors: manufacturing, construction, services, and commerce. The principal factors promoting firm growth are business strategies that are focused on product diversification and market share expansion; location in large urban centers; legal status as a limited liability company; the presence of price competition; presence in markets with high demand; and certain government policies such as labor regulations, anti-trust and environmental policy. The principal factors impeding firm growth are lack of access to qualified workers and managers; location in smaller population centers; and certain other government policies such as regulation of foreign trade and policies that promote domestic price volatility.

Résumé : Ce document examine l'expérience de la croissance économique au Maroc de la perspective des entreprises privées. En utilisant des modèles de taille optimale des entreprises comme un cadre théorique, le document analyse de manière empirique les facteurs affectant le ...

This article develops an empirical analysis of an important characteristic of primary commodities: persistence of price variability in response to shocks, asymmetry in variability, and volatility of prices. This analysis is applied for 14 Ecuadorian internal consumption products for the period January 1992 - July 2007. Three types of Autoregressive Conditional Heteroskedasticity (ARCH) models are used to test the hypotheses of persistence, asymmetry and volatility. This topic is particularly important for small-scale agricultural production in developing countries as variability in prices does not allow them to anticipate price movements and therefore improve their decision making process related to crop selection, period of cultivation, and technology selection. So variability of prices may be considered an important indicator of rural market efficiency. Given that there are not policies intended to reduce the exposure of small farmers to such variations, market-based strategies are urgent to reduce the risk of small-farmer agricultural production.

In the early 1990's, after four decades of relying on government authorized minimum price supports and the required public stockholding necessary to achieve price risk management, the United States dairy industry began a journey toward a shift to a market clearing equilibrium system. In this new era the forces of supply and demand determine product prices and changes in those prices. With this market clearing system comes in increase in the volatility of product prices and the risk associated with this volatility .A potentially important co~onent of this new structure is the development of an operational futures market for selected milk and dairy products. In June of 1993 the Coffee, Sugar, & Cocoa Exchange (CSCE) introduced a contract on Cheddar Cheese. The Chicago Mercantile exchange began trading a cheese contract in October of 1997. Today there are contracts covering cheese, butter, nonfat dry milk and raw milk. As the pnoduction of cheese represents over one-third of the use of raw milk in the United States this contract has the potential of serving as an important price risk man~gement tool. An important question to be addressed is whether or not the $peculative trading activity on these contracts will increase or decrease spot price volatility .This study investigates this question for the CSCE cash cheese market. The results suggest that the trading on the futures market for Cheddar Cheese, has not increased the cheese spot market price volatility and therefore provides additional support for the continued development of the futures market as a price risk management tool by the dairy industry .

is likely to increase the macroeconomic efficiency of the EU ETS and offers scope to partially address its distributional impacts will have negligible competitiveness impacts reduces the distortions associated with free allocation and is correspondingly more compatible with EU State Aid legislation will have a smaller impact on EU ETS prices than allocation cutbacks without auctioning will increase management attention and thus market efficiency Auctioning may also provide a hedge against projection uncertainties, reduce price volatility, and increase investor stability. The recent EU ETS market collapse is a dramatic manifestation of uncertainty in emission projections. Reserving some allowances for periodic auctions: could assist transparency and liquidity; offers a potential price cushioning mechanism (as in US transmission auctions), to create a more stable EU ETS market; and might facilitate ex-ante agreed target price ranges, thereby increasing predictability for investors Auctioning poses no significant implementation difficulties either ascending-bid or sealed-bid auctions could be used and based upon extensive experience, for example with securities auctions should be open to as wide a group of bidders as possible the concerns of small bidders can be addressed, for example through reserves guaranteed at the strike price For the longer term (post 2012), auctioning could also: help protect industrial competitiveness by enabling WTO-compatible border-tax adjustments help provide a long-term carbon price signal by recycling revenue into carbon contracts

This paper explores how the elimination of Madagascar's Marketing Board (MB) in 1995 affected prices paid to farmers, incentives, and regional indicators of poverty and inequality. After steadily losing market share, Madagascar has been able to regain some of the lost ground since the mid-1990s. Margins between FOB and farmgate prices have spectacularly narrowed down, but this effect is dwarfed by that of world-price volatility. A counterfactual analysis based on a model of Cournot competition between vanilla traders suggests that whatever limited competition there is among them has contributed to raise purchase prices and the cash income of vanilla farmers. However the effect on farmers' consumption remains small because a large part of it is self-consumed. The effect on aggregate measures of poverty and inequality is even smaller, even at the regional level. After taking into account the reduction in Madagascar's monopoly power on the world vanilla market implied by the elimination of the MB, the induced rise in producer prices is estimated to have lifted about 20,000 individuals out of poverty.