Jumps in Euribor and the effect of ECB monetary policy announcements

The main tool that the ECB uses to influence monetary policy is through the short-term refinancing rate, a change in the short-term interest rate can in turn cause the whole yield curve to shift. In addition to central bank announcements, interbank rates such as Euribor are also influenced by, forward guidance from the ECB, various macroeconomic events, liquidity in the money markets and the perceived credit worthiness of financial institutions. Forward rates are usually used by policy makers and market practitioners to examine expectations, but options provide additional information about the uncertainty of these expectations, particularly future jump expectations. This research examines the jump characteristics of the 3-month Euribor futures contract and its corresponding futures option contracts using both a jump diffusion model with a Bernoulli jump distribution and option-implied parameters using a jump diffusion process with Poisson distribute. We find that both the Bernoulli jump analysis of historical data and implied jump diffusion model succinctly capture diffusion volatility, jumps and jump size. Using a regression analysis to examine the effect of ECB refinancing rate monetary policy announcements on the 3-month Euribor and the associated jump parameters, we find a significant relationship between ECB announcements and the probability of a jump in Euribor. Regression coefficients on the implied jump amplitude parameters suggest that the market correctly anticipates the direction of the rate announcement suggesting option-implied jump parameters can predict, to some extent, ECB announcements. However, our results also show that there is significant uncertainty before the announcements, and this implies that monetary policy communication is not having the full desired effect.     

Correlation structure between inflation and oil futures returns: An equilibrium approach

We use an equilibrium model of a monetary economy to understand the economics behind the correlation between inflation and oil futures returns. We find that some of the positive correlation found in empirical studies is due to the fact that oil is in the consumption basket; however, this accounts only for a minor part of it. There exist other important sources of correlation related to monetary shocks and output shocks. In particular, we find that the correlation is extremely sensitive to the reaction of the central bank to output shocks, while the reaction to inflation changes is less significant. We estimate our model using maximum likelihood with the following data sets: crude oil futures prices, nominal interest rates, inflation rates and money supply growth rates. Our estimates suggest that the monetary authority overreacts to output shocks by increasing the money supply in a more than necessary amount, generating a significant source of positive correlation. From a practical perspective, We find that it is a good strategy to use as a hedge, the futures whose maturity is closer to the hedging horizon. This is particularly true for short-term hedging.     

Re-evaluating energy efficiency in China

Energy efficiency is a sensible scheme for saving money, conserving natural resources and reducing CO2 emissions. However, incentives for energy conservation vary greatly between different nations. Energy prices are the key to energy conservation, many observers argue. This paper focuses on one of the world's most rapidly developing energy consumers -- China -- and contemplates the current and future impact of energy prices on China's energy-efficient behaviour.     

Exchange-rate economics for the resources sector

The paper provides an account of aspects of exchange-rate economics that are of particular relevance to the resources sector. The issues discussed include exchange-rate volatility and the risk management practices used to deal with it, the role of productivity differences across countries, and the impact of a booming resources sector on the country's exchange rate. The discussion is organized around a simple stylized model that emphasizes the quantity theory of money and purchasing power parity as a long-run link between prices and exchange rates.     

碳中和背景下欧盟碳边境调节机制对我国的影响及对策分析

在全球碳中和的新形势下,欧盟委员会于2021年7月正式提出"碳边境调节机制"(CBAM)立法提案,并计划于2023年起实施。本文在总结立法提案关键要素的基础上,着重分析欧盟CBAM的合法性与合理性,研判可能对我国产生的潜在影响,并从国际国内层面提出对策建议。分析发现,欧盟采取"名义"碳市场的形式,初期将覆盖水泥、电力、化肥、钢铁和铝等5个行业,只核算产品生产过程的直接排放,暂不考虑间接排放,2023—2025年是过渡期,2026年开始正式实施。欧盟CBAM的合法性与合理性面临诸多挑战:不符合世界贸易组织国民待遇原则和最惠国待遇原则,但存在满足关税与贸易总协定例外条款的可能性;违反国际气候治理的共同但有区别的责任原则、公平原则和各自能力原则,也不符合公约关于国际贸易歧视或变相限制的条款;对解决碳泄漏问题和保护本土竞争力的作用有限;产品隐含碳核算和碳价确定是技术难点问题。影响评估发现,欧盟CBAM将使我国受影响部门的对欧出口总额降低11%~13%,出口成本增加1亿~3.05亿美元,其中约四分之三的成本将由钢铁行业承担,对贸易隐含碳的下降作用有待进一步考量;此外,欧盟CBAM将会影响多边国际气候谈判进程,也会对我国经济社会发展、国际贸易、产业转型、技术提升等方面产生间接影响。我国应在国际层面坚定在气候治理多边框架下解决碳泄露问题,探索提出中国方案;积极推进贸易自由化,提升我国贸易优势;加强中欧对话协商,避免CBAM成为中欧"绿色贸易壁垒"。在国内层面稳步加快全国碳排放权交易体系建设,夯实碳排放核算基础能力,加强科学研究与交流合作。     

Iron ore spot price volatility and change in forward pricing mechanism

To examine the impact of the change in forward pricing mechanism on the volatility of iron ore spot prices, we model the iron ore daily price of Platts IODEX from October 7, 2008 to September 21, 2012. The identified iron ore spot price tends to be less volatile after the introduction of quarterly pricing mechanism. Our main approaches are as follows: (i) to decompose the spot price of Platts IODEX into two subsamples and relate the result of the structural break to the date of the switch in the iron ore forward pricing mechanism; (ii) to apply the EGARCH (1, 1) model to simultaneously capture the long memory and the asymmetric effect on the volatility of the iron ore spot price; and (iii) to delineate the news impact curve to further interpret the asymmetric effect.     

Environmental Assessment Framework for Policy Applications: Life Cycle Assessment,External Costs and Multi-criteria Analysis

The paper presents a framework for the analysis of external costs of environmental burdens, namely an impact pathway analysis, often coupled with the inventory stage of life cycle assessment (LCA). The ground rule is: quantify as much as possible in terms of burdens (pollutant emissions, etc.), impacts, and their monetary equivalent, then use multi-criteria analysis (MCA) for any remaining impacts that are considered to be too uncertain or defy quantification through to monetization. Although MCA could be used directly on estimates of burdens or impacts, monetary valuation provides a mechanism for consistent weighting of impacts categories based on assessment of public preference. Further advantages of extending LCA through detailed impact assessment combined with monetary valuation are that it greatly simplifies MCA by combining a large number of different environmental impact categories, thereby avoiding an unmanageably large number of criteria, and also facilitates cost benefit analysis (CBA). The risks are noted of inappropriate use of the tools or interpretation/use of the results, and recommendations are made for improved practice. These points are illustrated with examples. The key messages are: (1) that policies should be targeted correctly to give a clear signal which source of a burden should be reduced by how much; (2) that analysts should take into account the needs of policy makers and the link between the analysis and possible policy applications; and (3) that current LCA practice gives limited guidance in both areas, largely through a lack of consideration of the relative and absolute importance of different types of impact. However, this is precisely the strength of external costs analysis, particularly when used with MCA.     

影响中国碳价的能源价格因素灰关联研究

本文选取中国碳排放价格数据和8种能源价格指数为研究变量,运用灰色关联方法研究了中国能源价格对中国碳价的影响。研究结果发现,化石能源价格对中国碳排放价格的影响较大,特别是煤炭、成品油和基础油价格对碳价的影响最大;低污染能源中,与天然气相比,液化气价格对中国碳排放价格影响明显。研究结果指出了保持碳市场价格稳定、防范价格异常波动的重要性,并从能源价格体系和能源消费结构角度提出了政策建议。     

The macroeconomic determinants of volatility in precious metals markets

This paper models the monthly price volatilities of four precious metals (gold, silver, platinum and palladium prices) and investigates the macroeconomic determinants (business cycle, monetary environment and financial market sentiment) of these volatilities. Gold volatility is shown to be explained by monetary variables, but this is not true for silver. Overall, there is limited evidence that the same macroeconomic factors jointly influence the volatility processes of the four precious metal price series, although there is evidence of volatility feedback between the precious metals. These results are consistent with the view that precious metals are too distinct to be considered a single asset class, or represented by a single index. This finding is of importance for portfolio managers and investors.     

National,regional and local attitudes towards climate change: identifying appropriate target audiences for communications

A government-funded scheme, the UK Climate Change Communications Initiative (UKCCCI), has provided money for organisations to deliver projects that attempt to impact positively on people's attitudes towards climate change. This devolution of communications is a relatively novel approach after previous centralised campaigns. This paper considers what size of target audience is most appropriate for attitude change initiatives. It compares data from a regional UKCCCI project aimed at residents of two counties with a nationally representative dataset. Regional data are also analysed to see if there are differences in attitudes within the two-counties target audience. The study suggests that attitude change interventions must strike a balance between personalisation of information and the higher cost of targeting smaller groups with more specific material.     

Influence of production costs and inventories on mineral prices

The purpose of this article is to broaden understanding of the factors which exert major influences on prices for industrial metals beyond the widely recognized tendency for prices and inventories to move in opposite directions. Specifically, the relationship between inventory levels and price volatility is examined. In addition, the relationship between prices and production costs is also examined. A few thoughts are expressed on the relationship between prices and industry structure. The paper includes a qualitative discussion about why a link should exist between prices and production costs, a graph illustrating the relationship between prices and inventories, and econometric equations quantifying the relationship between prices, production costs and inventories.     

Market power and cost efficiency: the case of the US aluminum industry

The purpose of this paper is to construct and empirically test a model designed to determine the link between market concentration and price with separate effects of market-power and cost-efficiency in change of industrial concentration. The analysis is conducted within the context of a single oligopoly, specifically, the US primary aluminum industry. Using time-series data, the model indicates that both market-power and cost-efficiency effects are significant resulting in unwavering prices despite diminishing market concentration in the industry throughout the sample period.     

Impact of climate change on food security of small islands: The case of Mauritius

This paper studies the implications of high food prices resulting from climate change on food security in small islands, using Mauritius as a case‐study. Climate change may adversely impact prices of agricultural commodities. The study derives and calculates the government costs and the welfare effects of an increase in the world price of rice on consumers in Mauritius. Using an equilibrium displacement model, this study finds that an increase in the price of rice by 35%, as predicted by the literature on climate change and rice prices, will result in an increase of 28.8% in government spending, representing the additional outlays to support the subsidy scheme for food security. Using 2012 as the baseline, the welfare analysis results suggest that consumer surplus for ration rice consumers increases by 626 million Mauritian Rupees (MUR) or US$18 million while consumer surplus decreases by MUR454 million (US$13 million) for basmati rice consumers.     

THE FLOOD HAZARD AND DYNAMICS OF THE URBAN RESIDENTIAL LAND MARKET1

ABSTRACT: Literature on the flood hazard/residential land market relationship is full of contradictory findings, many of which are counter-intuitive to the belief that flooding has a negative impact on house prices. This research advances a conceptual framework through which these relationships might be re-examined. Based on the expected utility model, the theoretical framework integrates the economic notion of capitalization with spatial and temporal characteristics of the flood hazard. Four communities with different flood regimes are used to test the effect of flooding on the residential real estate market. Results show that, (1) there is an identifiable relationship between characteristics of the flood hazard and changes in house values; (2) the length of the recovery period is dependent on characteristics and expectations of flooding, attributes of the real estate market, and availability of capital to fuel recovery; and (3) dynamics of the urban market and spatial extent of the flood hazard influence these relationships. Further research is now necessary to examine these findings under different spatial, temporal, hydrological, and socio-economic conditions.     

On the price-volume relationship in crude oil futures markets

This paper applies a quantile regression model to examine the relationship between the contract prices and trading volumes of light sweet crude oil contracts on the New York Mercantile Exchange (NYMEX) and Brent crude oil contracts on the Intercontinental Exchange (ICE). The results show a tandem rise in prices and volumes for light sweet crude oil contracts but a deviation between prices and volumes for Brent crude oil contracts. These two crude oil contracts exhibit significantly different relationships between prices and volumes when prices fluctuate. This finding can help analysts and investors in their investment decisions.     

The relentless progress of commodity exchanges in the establishment of primary commodity prices

A continuously expanding group of commodities are being priced on commodity exchanges. This paper explains the causes to the increasing preference of exchanges as pricing instruments. It also provides the detail of the shift in the 1970s and 1980s from producer determined prices to prices set by commodity exchanges for three major commodities—aluminum, nickel and petroleum.     

SMEs and voluntary environmental initiatives: a study of stakeholders' perspectives in Hong Kong

The environmental performance of Hong Kong's businesses is currently perceived as rather poor. Small and medium-sized enterprises (SMEs) in particular are mostly unaware of the environmental impact of their business. Government and professional bodies have recently started to develop various initiatives to improve the SME sector's awareness of environmental and social issues, and external factors such as supply chain requirements, consumer preferences and energy prices are also exerting a growing influence. Based on extensive interviews with representatives of seven key stakeholder groups, this paper explores the effectiveness of such drivers to engage SMEs with environmental change and corporate social responsibility (CSR). It finds that most existing efforts, such as environmental support programmes and award schemes, do not have a great impact on the environmental and social performance of Hong Kong's SMEs.     

Using Count Data and Ordered Models in National Forest Recreation Demand Analysis

This research addresses the need to improve our knowledge on the demand for national forests for recreation and offers an in-depth data analysis supported by the complementary use of count data and ordered models. From a policy-making perspective, while count data models enable the estimation of monetary welfare measures, ordered models allow for the wider use of the database and provide a more flexible analysis of data. The main purpose of this article is to analyse the individual forest recreation demand and to derive a measure of its current use value. To allow a more complete analysis of the forest recreation demand structure the econometric approach supplements the use of count data models with ordered category models using data obtained by means of an on-site survey in the Bussaco National Forest (Portugal). Overall, both models reveal that travel cost and substitute prices are important explanatory variables, visits are a normal good and demographic variables seem to have no influence on demand. In particular, estimated price and income elasticities of demand are quite low. Accordingly, it is possible to argue that travel cost (price) in isolation may be expected to have a low impact on visitation levels.     

The toxicological paradigms of aluminum and the etiology of Alzheimer's disease in the nematode Caenorhabditis elegans

This study examined behavioral and enzymatic changes of C. elegans from its exposure to aluminum, and the resulting relationship with Alzheimer's disease. After chronic and acute exposure to aluminum, the results indicated that it alters the cholinergic status and behavior parameters of the nematode, suggesting a relationship between exposure to aluminum and the etiology of AD.     

Metal prices and the business cycle

Metal price fluctuations have recently been of interest not only because of their cyclical volatility but also of their interaction with business cycles. A related issue is whether metal prices move together sufficiently to collectively reflect macroeconomic influences. Correlation or the tendency for prices to move together has been termed “comovement”, where the commonality in prices reflects the tendency of commodity markets to respond to common business cycle and trend factors. Metal prices are known to respond to macroeconomic influences and the latter might well explain the common factor which causes them to move together. Our goal is to provide an estimate of the common factor in metal prices and to relate this factor to important macroeconomic influences. The prices we study are for aluminum, copper, tin, lead and zinc; the macroeconomic variables include industrial production, consumer prices, interest rates, stock prices, and exchange rates. Our results confirm that the common factor in metal prices can be related to such macroeconomic influences.