Showing papers on "Commodity published in 1987"
TL;DR: In this article, the authors provide simple, analytic approximations for pricing exchange-traded American call and put options written on commodities and commodity futures contracts, which are accurate and considerably more computationally efficient than finite-difference, binomial, or compound-option pricing methods.
Abstract: This paper provides simple, analytic approximations for pricing exchange-traded American call and put options written on commodities and commodity futures contracts. These approximations are accurate and considerably more computationally efficient than finite-difference, binomial, or compound-option pricing methods. OPTIONS WRITTEN ON A wide variety of commodities and commodity futures contracts' now trade in the U.S. and Canada. Nearly all these options are American style2 and thus have early exercise premiums implicitly embedded in their prices. Unlike the European-style option-pricing problems, however, analytic solutions for the American option-pricing problems have not been found, and the pricing of American options has usually resorted to finite-difference, binomial, or, more recently, compound-option approximation methods. While these approximation methods yield accurate American option values, they are cumbersome and expensive to use. The purpose of this paper is to provide an accurate, inexpensive method for pricing American call and put options written on commodities and commodity futures contracts. The development of the "quadratic" approximation method is contained in Section I. Commodity option and commodity futures option contracts are defined, the underpinnings of commodity option valuation are discussed, and the solutions to the European call and put option-pricing problems are presented. Unlike the non-dividend-paying stock option case, it is shown that the American call option written on a commodity, as well as the American put option, may optimally be exercised prior to expiration. The approximation methods for the American call and put option values are then derived in the
1,196 citations
01 Jan 1987
TL;DR: In this article, a framework is developed to assist economic planners and research administrators in making choices about priorities in the allocation of agricultural research resources using a multi-regional international trade model using concepts of economic surplus.
Abstract: A framework is developed to assist economic planners and research administrators in making choices about priorities in the allocation of agricultural research resources. A multi-regional international trade model using concepts of economic surplus is employed to derive ex ante measures of the relative economic benefits of alternative commodity and
regional research portfolios and the distribution of these benefits among consumers, producers, importers and exporters...
98 citations
TL;DR: The design and performance of the five currently or recently active international commodity agreements (ICAs): in cocoa, coffee, natural rubber, sugar, and tin) are discussed in this article.
83 citations
TL;DR: In this article, a two-period model of an industry of risk-neutral processors who have nonlinear production costs and who face transact ions costs in the spot and futures markets is put forth as a counterexample to the models of commodity markets in which processors' risk plays the major role.
Abstract: A two-period model of an industry of risk-neutral processors who have nonlinear production costs and who face transact ions costs in the spot and futures markets is put forth as a countere xample to the models of commodity markets in which processors' risk a version plays the major role. The model's equilibrium exhibits the sa lient endogenous features of actual commodity markets, namely, that t he futures price is below the current spot price, that processors hol d inventories despite this opportunity cost, that those holding inven tories are short in futures, and that processors as a group hold an u nbalanced, usually net short, position in the futures market. Copyright 1987 by University of Chicago Press.
71 citations
TL;DR: In this paper, a simple model is presented in which opening futures markets in a non-storable commodity encourages producers to choose riskier production techniques which destabilizes supply and hence the spot price.
Abstract: Futures markets allow agents to shift price risk onto speculators and encourages them to take riskier decisions. Historically their main impact has been to encourage the storage of commodities, thus arbitraging prices over time and reducing price fluctuations. This paper presents a simple model in which opening futures markets in a nonstorable commodity encourages producers to choose riskier production techniques which destabilizes supply and hence the spot price. Copyright 1987 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
64 citations
01 Jun 1987
TL;DR: In this article, the authors analyzed the changes in the structure of developing country commodity exports that have taken place over the past two decades and presented empirical evidence on the response of commodity exports to demand and supply.
Abstract: This paper studies the flow of primary commodity exports from non-oil exporting developing countries grouped by geographical region. The first part analyzes the changes in the structure of developing country commodity exports that have taken place over the past two decades. The second part presents empirical evidence on the response of commodity exports to demand and supply. These empirical results point to the low price and income elasticities of demand for certain primary commodity exports and to price elasticities of supply that are in general lower than the corresponding price elasticities of demand in the short run, but that are more sensitive to price in the longer run.
57 citations
TL;DR: This paper reviewed the theoretical and empirical micro and macro foundations for the frequent claims that instabilities in international commodity markets have deleterious effects on goal attainment in primary-commodity exporting developing countries.
55 citations
TL;DR: In this paper, the authors analyzed a price discriminating firm which sells its produce both in the domestic and on world markets under either exchange rate uncertainty or foreign price uncertainty, and they used a model of a price-sensitive firm which operates under price uncertainty to investigate its optimal level of output and sales in the two markets.
Abstract: Recent empirical studies (see e.g. Kravis and Lipsev [1977, 1978], Isard [1977], Aspe and Giavazi [1982]) demonstrate that there are notable divergencies between domestic and export prices. This empirical evidence suggests that the law of one price is systematically violated. Kravis and Lipsey [1977, p. 155] argue that "many firms involved in international trade, particularly manufacturers, are in the position of a discriminating monopolist faced with separate markets, each characterized by a different demand elasticity". A model which explicitly allows for price discrimination has been used by several authors (see for example Aspe and Giavazi [1982], Ethier [1982], Katz, Paroush and Kahana [1982] and Tarr [1979]). Katz, Paroush and Kahana [1982] (hereafter KPK), used a model of a price discriminating firm which operates under price uncertainty, to investigate its optimal level of output and sales in the two markets. The main assumption made in KPK [1982] is that the firm determines its level of output and the allocation of sales between the two markets before the resolution of uncertainty. Furthermore, no forward markets were available to this firm. In this paper, we analyze a price discriminating firm which sells its produce both in the domestic and on world markets under either exchange rate uncertainty or foreign price uncertainty. This firm is a monopoly in the domestic market but a price-taker on the world market. Our model differs substantially from the KPK model and in some cases conforms better with reality due to the following two assumptions. First, the firm determines its level of output before the resolution of uncertainty but decides about the optimal allocation of sales only after it observes the foreign price denominated in domestic currency. Secondly, forward markets to share the exchange-rate risk or the uncertain foreign commodity price are available and their impact on the firm's policy is analyzed. Hence, this work integrates two strands of literature. It combines studies on price discriminating firms (some were mentioned above) and studies on firm behavior when forward markets are available (Danthine [1978], Holthausen [1979], Katz and Paroush [1979], Feder, Just and Schmitz [1980]). In this paper, we are mainly concerned with a firm which always exports. This includes large
35 citations
TL;DR: In this article, an analysis of commodity price and exchange rate adjustments for five commodities exported to Japan by the United States reveals that during the 1970s, commodity prices were generally flexible and during the 1980s, price stickiness on the part of exporters/importers contributed to inflexible prices and asymmetric exchange rate response.
Abstract: Although agricultural commodities are often assumed to have flexible prices, little has been done to estimate exchange rate pass-through. Perfect commodity arbitrage opportunities imply complete pass-through; imperfect opportunities could lead to incomplete pass-through. Analysis of commodity price and exchange rate adjustments for five commodities exported to Japan by the United States reveals that during the 1970s, commodity prices were generally flexible. During the 1980s, when the dollar was rising, price stickiness on the part of exporters/importers contributed to inflexible prices and asymmetric exchange rate response. Specifically, an exchange rate increase was passed through for some commodities but not a decline.
31 citations
TL;DR: This paper reviewed trends in the involvement of transnational corporations (TNCs) in the non-fuel commodity industries of developing countries, noting that while the role of these firms in primary production has been eroded somewhat, their role in downstream activities is as strong as ever.
31 citations
TL;DR: A general review of some of the main issues facing the world commodity economy in the 1980s, particularly those arising from the dramatic collapse in the foreign exchange earnings of developing countries from their exports of primary commodities, can be found in this article.
Book•
01 Jan 1987
TL;DR: The origins and definition of international trade since the 11th century, the different functions in international trade an approach to world commodity markets, and the rationale of international trading firms: the trader's function, many jobs classification and evolution of trading.
Abstract: Part 1 Origins and definition: evolution of practices, methods and structures of international trade since the 11th century the different functions in international trade an approach to world commodity markets. Part 2 Functioning and rationale of international trading firms: the trader's function the trader's many jobs classification and evolution of trading. Part 3 The major trading firms and their environment: the grain trade the sugar trade the coffee and cocoa trade the non-ferrous metals trade trade in some other major commodities.
TL;DR: In this article, a demand model for energy commodities using a household production function approach is presented, and the model is stated in a utility maximization framework where utility is assumed to be a function of two composite commodities directly yielding utility.
TL;DR: In this paper, the authors argue that the post-World War II world has seen the transformation of the international system from a configuration with several rival great powers into one with two superpowers and a set of lesser but still substantial powers with democratic politics and mixed economies.
Abstract: The post-World War II world has seen the transformation of the international system from a configuration with several rival great powers into one with two superpowers and a set of lesser but still substantial powerssecond-tier states with democratic politics and mixed economies. One of the recurrent concerns of the latter has been to secure supplies of natural resources. We argue that postwar conditions point to eight elements of prudent resource policy for middle-level powers. Such states should: (i) avoid military means; (2) choose trade partners whose political interests overlap with their own and who enjoy political stability; (3) seek to create in supplier and transit countries a structure of economic interests that will make supply agreements self-enforcing; (4) diversify with respect to commodity dependence, supplier share, and transit bottlenecks; (5) tailor stockpiles to the urgency of demand; (6) exploit technology to reduce dependence and enhance bargaining advantages; (7) encourage the private sector and public enterprises to become intermediaries in the international resource trade; and (8) pursue strategic interdependence among consumer nations by creating multilateral stakes in the maintenance of normal commerce in resources. In this paper we develop a set of general prescriptions for the behavior of mid-level powers with small endowments of natural resources. We hold that states which follow these prescriptions will avoid endangering their economic performance. Indeed, they may outperform others that apparently hold an advantage in terms of greater resource endowments and military power. We use the case of Japanese energy policy to develop our prescriptions and to demonstrate their feasibility. The case has special interest because of the importance of energy resources in the world economy, Japan's extreme dependence on and thus policy efforts related to-imported energy, and the vigor of the Japanese economy.
TL;DR: This article argued that commercial, fiscal, and exchange rate policies and the response of the majority of rural producers to them were the most important factors determining the conditions of production and trade during the period 1974-1984.
Abstract: To state that government policy has been at the heart of the agrarian crisis in Lusophone Africa is not to deny the importance of drought, the depressed state of international commodity markets, and externally-provoked destabilization in contributing to food shortages and declining volumes of agricultural exports. Rather, this essay argues that commercial, fiscal, and exchange rate policies and the response of the majority of rural producers to them were the most important factors determining the conditions of production and trade during the period 1974-1984. In her review of the literature on the food crisis in Africa, Sara Berry (1983) singles out the secular struggle over access to resources as motivating African governments in their policy-making. The crisis in Lusophone Africa can be viewed as a struggle between state officials and peasants over the amount and disposition of marketable surpluses. In each of the countries, politicians and bureaucrats sought control over the marketing and pricing of agricultural products and over the importation of basic consumer goods more as a means of securing state revenues and personal gain than as an instrument for promoting rural development. Resistance to exploitative policies by food and export crop producers has been the main reason for the agricultural decline until at least 1984. This resistance manifested itself in various ways: diminished production, parallel markets, smuggling, emigration and support for antigovernment forces. Such behavior has been described before, notably by Robert Bates in his work Markets and States in Tropical Africa (1981). Bates examined how the governments of Nigeria, Ghana, Kenya, Tanzania, Zambia, the Sudan and the Ivory Coast squeezed the incomes of small rural cultivators through taxation, overvalued exchange rates, and monosoponistic marketing boards. Bates explained that governments were attempting to extract revenues and export commodities for financing the state apparatus as well as cheap food and raw materials in the interests of urban industrialists and workers. He also pointed out that governments neglected investment in food-producing sectors, preferring (more for political than economic reasons) investments in state farms and larger scale capital-intensive projects where benefits were directed towards client groups. More often than not, the interests of small producers were undermined. This article
TL;DR: In this article, the existence and characterization of directions of tariff, commodity tax, and transfer payment reforms to ensure a Pareto improvement following a change in the economy's endowments, technology, preferences, or trading possibilities are considered.
TL;DR: In this paper, the authors look at the reasons for low agricultural productivity, consumer acceptance of high commodity prices, and ways to stimulate reduced production costs and thus improve the situation of Japanese farming.
TL;DR: The authors reviewed Chinese economic reform to date and sketched a linked sequence of reforms stretching over the coming 20 years, arguing that the logical interrelations of a market system require that markets in China be developed in a particular order: first commodity markets, then loanable funds, then capital goods, and finally labor.
Posted Content•
TL;DR: In this paper, a statistical reference summarizes current and historical data on U.S. foreign trade in agricultural products and highlights commodity and country information, including values, quantities, principal markets for I agricultural exports, import sources, and exports through Government-financed: programs.
Abstract: This statistical reference summarizes current and historical data on U.S. foreign trade in agricultural products. Tables highlight commodity and country information, including values, quantities, principal markets for I agricultural exports, import sources, and exports through Government-financed: programs.
TL;DR: In this article, the major barriers that affect agricultural trade between Canada and the United States and discusses their importance, as well as some of the potential impacts on a commodity basis are discussed.
Abstract: series of negotiations which are aimed at reducing bilateral trade restrictions and creating a new freer trade regime. If successful, these negotiations would require the reform of many established programs and the harmonization of each country's protective devices. Naturally, restrictions on trade in agricultural products are an integral part of the Canada-U.S. trade negotiations. Currently, more than 30% of Canadian agricultural exports go to the United States, and about 60% of Canadian imports come from that market, amounting to a two-way trade of C$5 billion annually. About 40% of U.S. exports to Canada are shipments of fresh fruits, nuts, and vegetables. In 1985, over 40% of Canadian agricultural exports to the United States were live animals and red meats, with the remainder widely distributed among other products. Freer trade relations would enhance the reciprocal flows that already exist between Canada and the United States, as well as create new trade opportunities for selected commodities which are now subject to formal or informal barriers. This paper describes the major barriers that affect agricultural trade between Canada and the United States and discusses their importance. Additionally, it attempts to outline some of the potential impacts on a commodity basis.
TL;DR: In this article, the authors used the theory of power and conflict in distribution channels to help interpret the behavior of coal users and trading houses in the Australian-Japan coal trade, and found that coal users understand and implement modern marketing strategy more effectively than Australian producers.
TL;DR: In this paper, the authors test whether mean rates of return during trading times differ from the mean rates during non-trading times, and whether trading time returns differ significantly from previous nontrading time returns.
Abstract: Through the examination of one commodity contract, soybeans, and one financial contract, U.S. Treasury bonds, the authors test to determine (1) whether mean rates of return during trading times differ from mean rates of return during nontrading times; (2) whether mean returns during trading times and nontrading times differ by day of the week; (3) whether trading time returns differ significantly from previous nontrading time returns; and (4) the extent to which trading and previous nontrading returns are correlated. In addition, the authors empirically examine a possible explanation for the results obtained.
TL;DR: In this paper, the adhesive industry is evaluated to ascertain whether or not the business/industry is moving toward becoming a commodity business, and both quantitative and subjective analysis of these specialty businesses are undertaken to evaluate the business current condition and their future.
TL;DR: The need for international cooperative action will grow pari passu with the need to cooperate in money and finance, which are in as much trouble as commodities and international trade.
TL;DR: In this article, the authors show that while this is correct if the objective is to restrain imports to a certain quantity, it is not correct when the target is to reduce imports in a certain percentage of domestic consumption.
Abstract: Should a country wish to reduce its dependence on imports of a certain commodity, an import tariff is typically recommended as the first-best (lowest-cost) policy instrument for achieving this non-economic objective. This note shows that while this is correct if the objective is to restrain imports to a certain quantity, it is not correct if the target is to reduce imports to a certain percentage of domestic consumption. In the latter case, a tariff-funded subsidy to producers is also required, the extent of which is larger the smaller the domestic price elasticities of demand and supply for the commodity. [410]
TL;DR: In this paper, the effects of price changes in the European Community's Common Agricultural Policy (CAP) with the use of direct and cross-price elasticities of supply and demand for sixteen major commodities, using base levels of production, consumption, and gross trade flows in each member state, along with rest-of-world data.
Abstract: Several efforts have been made since 1980 to estimate the costs and benefits of the European Community's Common Agricultural Policy (CAP). This paper summarises the approach and method adopted in developing one such effort, which aims to provide results at country, commodity and interest group level both for the CAP as a whole, and for changes in it.
Economic analysis of the effects of price changes in the CAP is carried out with the use of direct and crossprice elasticities of supply and demand for sixteen major commodities, using base levels of production, consumption, and gross trade flows in each member state, along with rest-of-world data. A number of CAP instruments, such as subsidies, levies, quotas and ‘green’ exchange rates, are built into the calculations and can be varied, along with support prices, to produce new situations in domestic markets and in world price levels. Both financial (budgetary) and welfare (economic surplus) effects of such exogenous price changes can be calculated. Certain policy changes, such as a move to ‘free’ markets, involve endogenous calculation of equilibrium prices. Trend projections subject to a priori constraints are used to produce results for years beyond the extent of data currently available.
The types of model run commonly carried out are discussed, along with several strategic judgments that became necessary in carrying out the research. Finally, questions concerning the future development and use of the model are addressed.
Book Chapter•
01 Jan 1987
TL;DR: A comprehensive new report on some of the more striking recent developments in a selection of areas within public sector economics can be found in this paper, where the authors introduce a new approach to the evaluation of public sector investment projects and review the latest work on the regulation of public utilities and nationalized industries.
Abstract: Book description: Public sector economics is a field which has seen immense progress in recent years, both in the theoretical treatment of the relevant issues as well as in empirical work. This comprehensive new reports on some of the more striking recent developments in a selection of areas within public sector economics. Part I of the book concerns public sector production. It introduces a new approach to the evaluation of public sector investment projects, reviews some of the latest work on the regulation of public utilities and nationalized industries, and discusses publicly provided private goods. Part II, on distribution and welfare, combines a study of the politics of fiscal policy with a fresh approach to the analysis of poverty, and surveys the main results that are available concerning commodity and income taxation. The final part turns to quantitative analysis, presenting some of the problems that arise in the econometric estimation of models of household behaviour, together with the rapidly expanding area of applied general equilibrium models.
Posted Content•
TL;DR: In this article, the authors explored the effect of U.S. economic policies in the 19805 on developing countries like Thailand, that is, countries that have external debt and that export primary commodities.
Abstract: UNIVERSITY OF CALIFORNIA, BERKELEY Department of Economics- Berkeley, California 94720 Working Paper 8729 THE IMPACT OF U.S. ECONOMIC POLICEES ON A CCMODITY-EXPORTING DEBTOR: THE CASE OF THAILAND Jeffrey A. Frankel February 3, 1987 Key words: Thailand, international debt, macroeconomic transmission, rice, agricultural trade Abstract This paper explores the effect of U.S. economic policies in the 19805 on developing countries like Thailand, that is, countries that have external debt and that export primary commodities. Thailand did not borrow enough in the 19705 to be one of the worst victims of the 1982 debt crisis. But increased debt—servicing requirements and the 1981~l986 depression in world commodity prices have hurt it, in part- icular, making reduction of the current account deficit difficult. The paper first discusses the effects of U.S. macroeconomic policies: how monetary and fiscal policies operate via three key macroeconomic variables among the industrialized countries--growth rates, real in- terest rates and exchange rates—-to determine the environment sur- rounding the commodity—exporting debtor country. Then the effects of U.S. trade policies are discussed, including U.S. import protection, strategic stockpiles, and agricultural export subsidies for rice and and sugar. The conclusion is that the U.S. could do much to help countries like Thailand as well as itself, by shifting to a mix of tighter fiscal and easier monetary policy and by liberalizing trade. JBL Classification: 121, 421, 431
TL;DR: An analysis of conservation reserve program contracts obtained during the 1986 sign-up periods indicates commodity program participants enrolled more acreage at higher costs than farmers not participating in other commodity programs as discussed by the authors.
Abstract: An analysis of Conservation Reserve Program contracts obtained during the 1986 sign-up periods indicates commodity program participants enrolled more acreage at higher costs than farmers not participating in other commodity programs. Significant differences also occurred between the various commodity program crops, reflecting the difference in benefits available for these crops.