The Role of Financial Speculation in Driving the Price of Crude Oil

Over the past 10 years, financial firms have increased the size of their positions in the oil futures market. At the same time, oil prices have increased dramatically. The conjunction of these developments has led some observers to argue that financial speculation caused the run-up in oil prices. Yet several arguments cast doubt on the validity of this claim. First, although the stock of open futures contracts is many times larger than the flow of oil consumption in the United States, comparing these two statistics is misleading. Stocks are not measured with respect to a specific unit of time but flows are, so the two are not directly comparable. Second, empirical analysis shows that changes in financial firms’ positions do not predict oil-price changes, but that oil-price changes predict changes in positions. Third, the evidence indicates that financial firms’ positions did not cause the market to expect persistent price increases during 2007/08. Other explanations for the increase in oil prices include macroeconomic fundamentals, such as interest rates and increased demand from emerging Asia. Of these two explanations, the one that seems most consistent with the facts explains oil-price fluctuations in terms of large and persistent demand shocks related to growth in global real activity in the presence of supply constraints.International topics

External Stability, Real Exchange Rate Adjustment and the Exchange Rate Regime in Emerging-Market Economies

In emerging-market economies, real exchange rate adjustment is critical for maintaining a sustainable current account position and thereby for helping to reduce macroeconomic and financial instability. The authors examine empirically two related hypotheses: (i) that real exchange rate flexibility and adjustment promotes external stability, and (ii) that a flexible nominal exchange rate facilitates real exchange rate adjustment. Based on an event-study analysis for a large set of emerging-market economies over the period 1975–2008, the authors find that real exchange rate adjustment has contributed significantly to reducing current account imbalances. The adjustment of current account deficits in countries with a fixed exchange rate regime does not typically occur through the classical adjustment mechanism, but as a consequence of exchange rate crises, where the nominal exchange rate collapses and there are substantial costs in terms of forgone output. Vector-error-correction results support the findings of the event study; namely, in the long run the real exchange rate movements facilitate current account adjustment.Development economics; Exchange rate regimes; International topics

Economies of Scale in the Canadian Food Processing Industry

Cost functions for three Canadian manufacturing agri-food sectors (meat, bakery and dairy) are estimated using provincial data from 1990 to 1999. A translog functional form is used and the concavity property is imposed locally. The Morishima substitution elasticities and returns to scale elasticities are computed for different provinces. Inference is carried out using asymptotic theory as well as bootstrap methods. In particular, the ability of the double bootstrap to provide refinements in inference is investigated. The evidence suggests that there are significant substitution possibilities between the agricultural input and other production factors in the meat and bakery sectors. Scale elasticity parameters indicate that increasing returns to scale are present in small bakery industries. While point estimates suggest that increasing returns to scale exist at the industry level in the meat sector, statistical inference cannot rule the existence of decreasing returns to scale. To account for supply management in the dairy sector, separability between raw milk and the other inputs was introduced. There exists evidence of increasing returns to scale at the industry level in the dairy industries of Alberta and New Brunswick. The scale elasticity for the two largest provinces (Ontario and Quebec) is greater than one, but inference does not reject the null hypothesis of increasing returns to scale.Translog cost function; Canadian food processing industry; returns to scale; double bootstrap

Investigating Non-Linearities in the Relationship Between Real Exchange Rate Volatility and Agricultural Trade

The article analyzes production and marketing lags in agri-food supply chains that force competitive producers and processors to commit to output targets before prices and exchange rates are realized. We show that export markets act as put options for exporters and an increase in the volatility of the real exchange rate will generally increase exports. Relaxing the assumptions about the real exchange rate distribution and risk preferences of producers and/or processors can introduce non-linearities in the relationship between exports and real exchange rate volatility. This relationship is investigated using the flexible non-linear inference framework of Hamilton (2001). Bilateral export equations for Canadian pork exports to the U.S. and Japan are specified. The empirical model shows that real exchange rate volatility has statistically significant non-linear effects on aggregate pork exports. Moreover, bilateral pork exports are less sensitive to country- specific variables than aggregate volatility in the real exchange rate.Real exchange rate volatility, non-linear flexible inference, production lags, pork exports

Investigating Non-Linearities in the Relationship Between Real Exchange Rate Volatility and Trade

Production and marketing lags in agri-food supply chains force competitive primary producers and food processors to commit to output targets before prices and exchange rates are realized. A theoretical model with one processor and many price-taking primary producers is developed to show that an increase in the volatility of the export price generally increases exports under risk neutrality. Furthermore, relaxing the assumption that the processing firm is risk neutral introduces non- linearities in the relationship between exports and export price volatility. This relationship is empirically investigated using the flexible non-linear inference framework developed by Hamilton (2001). The theoretical model provides the foundation for empirical bilateral export equations for Canadian pork exports to the U.S. and Japan. The empirical investigation supports the hypothesis that export price volatility has statistically significant non-linear effects on Canadian pork exports.Exchange rate volatility, non-linear flexible inference, production lags, pork exports

Les changements structurels peuvent-ils être la cause de la grande modération de l'économie américaine?

Ce mémoire vise à déterminer les causes de la stabilisation du cycle économique américain, phénomène mieux connu sous le nom de la Grande Modération. Ce dernier fut remarqué au début des années quatre-vingt et quatre causes principales furent évoquées par la littérature: une meilleure politique monétaire, une meilleure gestion des stocks, une réduction de la taille des chocs économiques et finalement un changement d'ordre structurel de l'économie. Nous comparons les statistiques cycliques et les sentiers de réponse des principales variables économiques de la période 1959 à 1979 par rapport à la période 1984 à 2006. Les sentiers de réponses sont obtenus par plusieurs spécifications d'une représentation vectorielle autorégressive structurelle (SVAR) avec restrictions de long terme à la Blanchard et Quah. Les intervalles de confiance de ces sentiers sont obtenus par méthode de bootstrap. Cette méthodologie nous permet d'évaluer si, effectivement, des changements structurels pourraient expliquer cette stabilisation du cycle économique. Nous trouvons d'abord que de nombreux faits cycliques ont changé entre ces deux périodes. Ensuite, nos résultats montrent que la stabilisation du PIB pourrait être due à une réduction de la taille des chocs, alors que la stabilisation de l'inflation serait due à une politique monétaire plus crédible. Nous trouvons également qu'une plus grande flexibilité du marché du travail, notamment celle des salaires, pourrait avoir jouée un rôle dans cette Grande Modération. ______________________________________________________________________________ MOTS-CLÉS DE L’AUTEUR : Grande Modération, SVAR, Cycles économiques

Commentary “The sexualized-body-inversion hypothesis revisited: Valid indicator of sexual objectification or methodological artifact?”

A commentary on The sexualized-body-inversion hypothesis revisited: Valid indicator of sexual objectification or methodological artifact? by Schmidt, A. F., and Kistemaker, L. M. (2015). Cognition 134, 77-84. doi: 10.1016/j.cognition.2014.09.003 Recent objectification research found results consistent with the sexualized body-inversion hypothesis (SBIH): People relied on analytic, “object-like” processing when recognizing sexualized female bodies and on configural processing when recognizing sexualized male bodies (Bernard et al., 2012). Specifically, Bernard et al. (2012) showed that perceivers were better at recognizing sexualized male bodies when the bodies were presented upright than upside down, whereas this pattern did not emerge for sexualized female bodies; thus, male bodies were recognized configurally similar to other human stimuli whereas female bodies were recognized analytically, similarly to most objects (see Kostic, 2013 for an exact replication). Based on two studies, Schmidt and Kistemaker (2015) concluded that Bernard et al. (2012)\u27s findings were: (i) due to a symmetry confound; (ii) not due to target\u27s sexualization. This commentary challenges these conclusions

Commentary “The sexualized-body-inversion hypothesis revisited: Valid indicator of sexual objectification or methodological artifact?”

A commentary on The sexualized-body-inversion hypothesis revisited: Valid indicator of sexual objectification or methodological artifact? by Schmidt, A. F., and Kistemaker, L. M. (2015). Cognition 134, 77-84. doi: 10.1016/j.cognition.2014.09.003 Recent objectification research found results consistent with the sexualized body-inversion hypothesis (SBIH): People relied on analytic, “object-like” processing when recognizing sexualized female bodies and on configural processing when recognizing sexualized male bodies (Bernard et al., 2012). Specifically, Bernard et al. (2012) showed that perceivers were better at recognizing sexualized male bodies when the bodies were presented upright than upside down, whereas this pattern did not emerge for sexualized female bodies; thus, male bodies were recognized configurally similar to other human stimuli whereas female bodies were recognized analytically, similarly to most objects (see Kostic, 2013 for an exact replication). Based on two studies, Schmidt and Kistemaker (2015) concluded that Bernard et al. (2012)\u27s findings were: (i) due to a symmetry confound; (ii) not due to target\u27s sexualization. This commentary challenges these conclusions

Economies of Scale in the Canadian Food Processing Industry

Cost functions for three Canadian manufacturing agri-food sectors (meat, bakery and dairy) are estimated using provincial data from 1990 to 1999. A translog functional form is used and the concavity property is imposed locally. The Morishima substitution elasticities and returns to scale elasticities are computed for different provinces. Inference is carried out using asymptotic theory as well as bootstrap methods. In particular, the ability of the double bootstrap to provide refinements in inference is investigated. The evidence suggests that there are significant substitution possibilities between the agricultural input and other production factors in the meat and bakery sectors. Scale elasticity parameters indicate that increasing returns to scale are present in small bakery industries. While point estimates suggest that increasing returns to scale exist at the industry level in the meat sector, statistical inference cannot rule the existence of decreasing returns to scale. To account for supply management in the dairy sector, separability between raw milk and the other inputs was introduced. There exists evidence of increasing returns to scale at the industry level in the dairy industries of Alberta and New Brunswick. The scale elasticity for the two largest provinces (Ontario and Quebec) is greater than one, but inference does not reject the null hypothesis of increasing returns to scale

Economies of Scale in the Canadian Food Processing Industry

Cost functions for three Canadian manufacturing agri-food sectors (meat, bakery and dairy) are estimated using provincial data from 1990 to 1999. A translog functional form is used and the concavity property is imposed locally. The Morishima substitution elasticities and returns to scale elasticities are computed for different provinces. Inference is carried out using asymptotic theory as well as bootstrap methods. In particular, the ability of the double bootstrap to provide refinements in inference is investigated. The evidence suggests that there are significant substitution possibilities between the agricultural input and other production factors in the meat and bakery sectors. Scale elasticity parameters indicate that increasing returns to scale are present in small bakery industries. While point estimates suggest that increasing returns to scale exist at the industry level in the meat sector, statistical inference cannot rule the existence of decreasing returns to scale. To account for supply management in the dairy sector, separability between raw milk and the other inputs was introduced. There exists evidence of increasing returns to scale at the industry level in the dairy industries of Alberta and New Brunswick. The scale elasticity for the two largest provinces (Ontario and Quebec) is greater than one, but inference does not reject the null hypothesis of increasing returns to scale