Showing papers on "Commodity market published in 1997"

Real Exchange Rates and Macroeconomics: Evidence and Theory

Abstract: Since the early 1980s, a large body of research has thrown doubt on the relevance of macroeconomic models for understanding exchange rates. The authors argue that a balanced reading of recent literature in exchange rate economics gives a more optimistic assessment. Many studies have established the pertinence of long-run purchasing power parity (PPP) and the explanatory power of macroeconomic fundamentals in real exchange rate fluctuations. A reasonably strong case can be made for a traditional macroeocnomic interpretation of real exchange rates, which emphasizes short-run price stickiness, but long-run PPP. But a central new ingredient in this interpretation is the presence of international commodity market segmentation and persistent deviations from the 'law of one price.' An example is given of a dynamic general equilibrium model that can reproduce some of the observed features of real exchange rate fluctuations.

Agricultural Prices and Commodity Market Analysis

Abstract: This book emphasizes market and price analysis using agricultural examples. The focus of the book is on the application of econometrics and will help those going into fields involving market analysis and forecasting. The blend of theory and application is unique.

Unfair trade? Empirical evidence in world commodity markets over te past 25 years

Abstract: Since the 1970s, commodity prices have fallen in international markets at the same time that consumer pries have risen. The price of coffee declined 18 percent on world markets between 1975 and 1993, for example, but the consumer price for it increased 240 percent in the United States. Explanations for such diverging patterns remain largely unexplored in current economic literature. The author examines the spreads between international and domestic commodity prices, explains why they have increased, and analyzes their implications for commodity-exporting countries. He finds that the spreads have increased dramatically because of the asymmetric response of domestic consumer prices to movements in world prices. In all major consumer markets, decreases in world commodity prices have systematically been transmitted to domestic consumer prices much less than have increases. This may have cost commodity-exporting countries more than $100 billion a year because it has limited the expansion of demand for commodities in these markets. The asymmetric response, which has been attributed to trade restrictions and rising processing costs, appears to be caused largely by the behavior of international trading companies. Many of these companies are large enough to dominate most commodity markets. Surprisingly, although mainstream economists have suggested imperfect competition in international trade at both the producer and the consumer levels, they have not yet pointed it out at the intermediary level. Free trade requires that all players sing the same tune : competition. The author recommends a special effort to understand the determinants of consumer prices and the role of intermediaries at both wholesale and retail levels -starting with the collection of information about the activities of international trading companies. This effort would require the involvement of the World Bank and the World Trade Organization, because they have the resources to undertake such an operation worldwide. Only a better understanding of how these companies operate will remove the suspicion of unfair trade in international commodity markets.

World crude oil resources : evidence from estimating supply functions for 41 countries

Abstract: A gloomy outlook for non-OPEC oil supply is unwarranted. Several countries are still expanding, others show no sign of declining supply, and even those contracting will continue to add to reserves. Evidence to support or deny expectations of future scarcity or abundance of crude oil must show whether crude oil supply functions are shifting and, if so, in what direction. Watkins and Streifel estimate oil supply functions for 41 countries for which suitable data are available. Because of the poor quality of data, especially for reserves, the model specification is simple. Their model relates reserve additions to the imputed in situ price of discovered but undeveloped reserves and to the passage of time. The passage of time is a surrogate for measuring the net impact on supply conditions of the chance of finding oil, resource depletion, cost efficiency, and technology. Time's impact could be expansionary or contractionary. They test two main versions of the model, one a straightforward linear function, the other nonlinear, assuming decreasing returns. Both models yield similar results. In most cases the models fit the data reasonably closely, after adjustment for outliers. The complete model results show 26 countries with statistically significant shifts in supply functions - in almost equal parts expansionary and contractionary. The shift is often contractionary in countries with a long production history (including Burma, Tobago, Trinidad, and the United States). Some are OPEC countries, to which a model specification involving market price response does not properly apply. Tests on a small sample of countries for differences between earlier and later periods reveal limited evidence of an expansionary shift from 1980 onward. There is partial evidence that lower oil prices stimulate productivity. Watkins and Streifel suggest that a gloomy outlook for non-OPEC supply is unwarranted. Several countries are still in an expansionary phase. Others show no evidence of entering a period of decline. And countries in a contractionary phase will continue to add to reserves. Further research requires improving the database rather than employing more elaborate models. This paper - a product of the Commodity Policy and Analysis Unit, International Economics Department - is part of a larger effort in the department to analyze commodity markets and their impact on developing countries.

Commodity markets and the developing countries 4 (3)

Abstract: Regionalism boosts agricultural trade Oil prices -- finally Coffee prices surge Metals prices rebound

Do hedge funds and commodity funds affect commodity prices

Abstract: Commodity prices have been extremely volatile in recent years. Hedge funds and commodity funds are one possible source of the increased price violatility. The nature and size of commodity markets have changed in recent years, and several studies have found that commodity funds and hedge funds influence short term commodity price trends. This note examines the recent behavior of hedge and commodity funds and assesses their impact on commodity price movements.

Commodity Markets, Institutional Support Measures and Challenges for Exporting Countries

Abstract: The markets for the traditional commodity exports of developing countries have undergone a dramatic change since the early 1980s, with serious adverse effects on the real incomes of the majority of commodity-exporting countries. Real commodity prices (that is, nominal commodity prices expressed as a ratio to prices of manufactures exported by developed countries) have been on a downward trend so severe as to constitute a phenomenon not seen since the Great Depression of the 1930s. By 1993, real commodity prices had fallen to about 50 per cent below the 1980 level, and were some 20–25 per cent below the 1932 level, which was the bottom of the interwar depression. Recent World Bank projections indicate only a small recovery in commodity prices, with a rise of 10 per cent between 1993 and 2000, prices in the latter year being projected at still substantially below the 1980 level by almost 50 per cent (World Bank, 1994).

Commodity markets and the developing countries 4 (2)

Abstract: Deepening slowdown in East Asia. Oil prices continue to fall. Grain harvests reach record high. Asian timber prices fall hard.

The European Grain Invasion 1870-1913

Abstract: This paper is primarily concerned with the effects of cheap grain on European wages, profits and rents. it brings a quantitative focus to bear on the question, just as Knick Harley (1978, 1980, 1986) and others have examined the quantitative implications of the grain invasion for the new world. The paper polots the dimensions of the grain invasion in several European countries, and explores the extente to which protection succeded in insulating economies from this international commodity market shock.

Stabilization property of speculative long-time storage in the model of standardized commodity market

Abstract: We investigate a model of standardized commodity market and activity of three economic agents on this market: producer, consumer and speculator. Producer and consumer are characterized by linear functions of supply and demand. We consider the ratio between the slopes of demand and supply functions is as such that market equilibrium without speculator is unstable. We investigate two speculative strategies which stabilize an equilibrium. The first strategy of speculator restricts price oscillation by some vicinity of an equilibrium price. This strategy is based on long-time storage and fixed speculative amount of commodity. The second strategy provides a convergence of price-formation process to an equilibrium value. The second strategy is also based on long-time storage, but in this case the speculator maximizes the amount of commodity to be bought, i.e. speculative amount is variable.