Conditional dependence structure between oil prices and exchange rates: A copula-GARCH approach

A semiparametric approach to short-term oil price forecasting

Are the crude oil markets becoming weakly efficient over time? A test for time-varying long-range dependence in prices and volatility☆

Prices of most agricultural and mineral commodities rose strongly in the past decade, peaking sharply in 2008. Popular explanations included strong global growth (especially from China and India), easy monetary policy (as reflected in low real interest rates or expected inflation), a speculative bubble (resulting from bandwagon expectations) and risk (possibly resulting from geopolitical uncertainties). Motivated in part by this episode, this paper presents a theory that allows a role for macroeconomic determinants of real commodity prices, along the lines of the “overshooting” model: the resulting model includes global GDP and the real interest rate as macroeconomic factors. Our model also includes microeconomic determinants; we include inventory levels, measures of uncertainty, and the spot-forward spread. We estimate the equation in a variety of different ways, for eleven individual commodities. Although two macroeconomic fundamentals – global output and inflation – both have positive effects on real commodity prices, the fundamentals that seem to have the most consistent and strongest effects are microeconomic variables: volatility, inventories, and the spot-forward spread. There is also some evidence of a bandwagon effect.

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Determinants of Agricultural and Mineral Commodity Prices

Is there one, global market for crude oil? This appears to be the assumption made by most petroleum economists, stated succinctly by Adelman in a recent issue of The Energy Journak "The world oil market, like the world ocean, is one great pool" (July 1984, p. 5). Policymakers have often implicitly held the opposite assumption - that the world market is fragmented - as evidenced by the efforts of many importing-country governments to seek special arrangements for "secure supply" from exporters in the 1970s and early 1980s. Likewise, oil exporters have sought "secure outlets" for their crude in the late 1980s and early 1990s. These arrangements make no sense if the world crude oil market is integrated. In a similar fashion, a policy of diversifying suppliers, which is practised by many importers now, is senseless in a globally unified market.

Is the World Oil Market "One Great Pool?"

The ‘official’ (OPEC) prices of crude oil before the collapse in the oil market in the mid-1980s can be interpreted as contract prices and analysed on the basis of the theory of futures (or forward) markets. This paper uses the generalized method of moments estimation technique to test for efficiency in the relationship between the official prices and the ex-post spot prices at the time of delivery. Efficiency is rejected for the sample period 1978–1985 as a whole, but evidence is found of improvements over time. Further, the GMM Wald and Hansen tests, although asymptotically equivalent, are shown to differ greatly when applied to a small sample of monthly oil price data.

Toward efficiency in the crude-oil market

The abrogation of gold clauses in 1933 and its relation to current controversies in monetary economics

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The illusion of stabilization policy

Theories of inflation

For the period 1959-1972 money growth in the United States was positively correlated with past inflation and negatively correlated with past unemployment, whereas for the period 1973-1984 this correlation pattern was reversed. International data, moreover, show that the eight largest western economies exhibit a wide variety of patterns for these correlations, and these patterns seem to be unrelated to average inflation. Theoretical analysis reveals that a model in which the monetary authority is concerned only with controlling inflation is consistent with any pattern of sample correlations of money growth with past inflation and past unemployment. This analysis suggests that international differences in these sample correlations result from differences in the sample variances of disturbances to productivity growth and to aggregate demand. Specifically, the analysis suggests that the critical difference between the pre-1973 and post-1973 periods for the United States was a decrease in the importance of transitory disturbances to aggregate demand relative to permanent disturbances to productivity growth. More generally, these results imply that we cannot readily infer the objectives of the monetary authority from observed patterns of monetary policy.

Steven L. Green

Papers

Toward efficiency in the crude-oil market

The abrogation of gold clauses in 1933 and its relation to current controversies in monetary economics

The illusion of stabilization policy

Theories of inflation

The Illusion of Stabilization Policy