Explosive oil prices

The author is grateful for the hospitality of the University of California, Berkeley as well as Resources for the Future, Washington, DC, while working on the paper. Financial support by the Fritz Thyssen Foundation for these research visits is gratefully acknowledged. An earlier version of this paper appeared as CESifo Working Paper No 4376.Peer reviewedPostprin

The Economics of Bitcoins : News, Supply vs Demand and Slumps

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Jumps in Oil Prices- Evidence and Implications

This paper studies the dynamic behavior of daily oil prices and finds strong evidenceof GARCH as well as conditional jump behavior. This implies that conditional heteroscedasticity is present and the empirical distribution of oil price changes has heavy tails. Thus, the oil price considerably sensitive to news and does not settle around a long-run trend. This finding has several important implications: First, this financial market variable-type behaviour hampers finding optimal depletion paths of oil as exhaustible resource as well as optimal decisions regarding the transmission to alternative technologies. Second, as the usage of oil is one of the main sources of carbon emissions, this non-existence of a clear long-run trend is likely to cause a current overextraction of oil, accompanied by severe consequences for the global climate.Oil price, conditional jumps, GARCH, Hotelling, climate change

A Characterization of Oil Price Behavior - Evidence from Jump Models

This paper is concerned with the statistical behavior of oil prices in two ways. It, firstly, applies a combined jump GARCH in order to characterize the behavior of daily, weekly as well as monthly oil prices. Secondly, it relates its empirical results to implications of Hotelling-type resource extraction models. The empirical analysis shows that oil prices are characterized by GARCH as well as conditional jump behavior and that a considerable portion of the total variance is triggered by sudden extreme price movements. This finding implies that, first, oil price signals are not reliable and, as a consequence, both finding optimal extraction paths and decisions regarding the transmission to alternative technologies are likely to be compromised. Second, this behavior is in stark contrast to the notion of deterministic trends in the price of oil.oil price, conditional jumps, GARCH, Hotelling, climate change, deterministic trend

Investigating the U.S. Oil-Macroeconomy Nexus using Rolling Impulse Responses

This paper is concerned with the apparent change in the U.S. oil price-macroeconomy relationship. It is investigated to what extent this change can be accounted for by the large oil price surges witnessed in the 1970s. The innovative approach of rolling impulse responses is applied and both the aggregate and the industry-level is considered. It is found that the first oil crisis has an “persistent” effect in the sense that this incident still dominates long-run results and superimposes both subsample and industry-specifics. The results, furthermore, suggest that the Great Moderation can essentially be explained by the non-occurrence of large oil shocks after the mid 1980s and that oil is less important for the economy than many researchers still believe.oil price, vector autoregressions, rolling impulse responses, Great Moderation

Renewable Energy and Net Electricity Imports

Elektrizitätswirtschaft; Import; Strom; Energiemarkt; Regenerative Energie

How Long Will Resources Last?

Rohstoffressourcen; Rohstoffversorgung; Produktivität; Welt

A Convex Hull Approach to Counterfactual Analysis of Trade Openness and Growth

In this paper, we apply a convex hull approach to counterfactual analysis of trade openness and growth. The experiments we choose evaluate the importance of trade openness for growth across African countries. Specifically, we ask the question “what would happen if African countries were more open?”. The evidence indicates that several countries don´t fall within the convex hull of the observed data and therefore counterfactual inferences are risky. This conclusion is at odds with the literature arguing that greater trade openness would unequivocally lead to higher growth in Africa.openness, economic growth, robustness, counterfactuals, convex hull

The Undisclosed Renminbi Basket: Are the Markets Telling us something about where the Renminbi – US Dollar Exchange Rate is Going?

On 21 July 2005 China adopted an undisclosed basket exchange rate regime. We formally assess and envisage the gradual evolution of the renminbi over time. We utilize nonlinear dependencies in the renminbi exchange rate and describe the smooth transition of the renminbi/U.S. dollar (RMB/USD) exchange rate using the family of time-varying autoregressive (TV-AR) models. Specifically, the nonlinear models allow for a smooth transition from one optimal level to another. Our estimation results imply that the RMB/USD exchange rate will likely be about 7.10 RMB/USD in summer/autumn 2009.China, renminbi, de facto exchange rate regime, TV-AR model, TV-AR-GARCH model

The Undisclosed Renminbi Basket: Are The Markets Telling Us Something About Where The Renminbi - US Dollar Exchange Rate Is Going?

On 21 July 2005 China adopted an undisclosed basket exchange rate regime. We formally assess and envisage the gradual evolution of the renminbi over time. We utilize nonlinear dependencies in the renminbi exchange rate and describe the smooth transition of the renminbi/U.S. dollar (RMB/USD) exchange rate using the family of time-varying autoregressive (TV-AR) models. Specifically, the nonlinear models allow for a smooth transition from one optimal level to another. Our estimation results imply that the RMB/USD exchange rate will likely be about 7.42 RMB/USD in summer/autumn 2008.China; renminbi; de facto exchange rate regime; TV-AR model; TV-AR-GARCH mode