Price Non-Convergence in Commodities: A Case Study of the Wheat Conundrum. SOAS Department of Economics Working Paper Series (185) pp. 1-31.

The close relationship between commodity future and cash prices is critical for the effectiveness of risk management and the functioning of price discovery. However, in recent years, commodity futures prices, across the board, have appeared increasingly detached from prices on physical markets. This paper argues that while various factors, identified in previous literature, which introduced limits to arbitrage have facilitated non-convergence, the actual extent of non-convergence in these markets is caused by essential differences in the mechanisms of price formation on physical and derivative markets. With reference to the particular case of the CBOT wheat market, the paper shows that the size of the spread between futures and cash prices can be theoretically and empirically linked to the increasing inflow of financial investment into commodity futures markets

Too much of a good thing? Speculative effects on commodity futures curves

The increasing inflow of index traders into commodity futures markets has been linked to anomalies in futures curves. At the same time, these investors have been welcomed as liquidity providers. In this paper, I reconcile the apparent dissent. Using factor decomposition, I show (a) that index and hedging positions have offsetting effects on futures curves, and (b) index positions are associated with upward sloping, peaked futures curves, and occasionally wave-like shapes linked to roll effects. These findings suggest that index traders are liquidity providers but can become too much of a good thing if exceeding hedgers’ demand for a counterparty

Compulsory Schooling and the Returns to Education: A Reexamination

We re-examine the effect of compulsory school law on education in the US pioneered by Angrist and Krueger (1991). We show that the standard instrumental variable approach of the education variable not only yields empirically inconsistent estimates, but is conceptually confused. The confusion arises from the rejection of the key causal variable as a valid conditional variable. By route of a causally explicit model design we are able to identify the circumstances under which the formerly rejected variable can yield valid inference values. Our investigation demonstrates the importance of building data-consistent models over estimator choice in successful research designs

Approaches to Price Formation in Financialised Commodity Markets

A recent debate about the financialisation of commodity markets has stimulated the development of new approaches to price formation which incorporate index traders as a new trader category. I survey these new approaches by retracing their emergence to traditional price formation models and show that they arise from a synthesis between commodity arbitrage pricing and behavioural pricing theories in the tradition of Keynesian inspired hedging pressure models. Based on these insights, I derive testable hypotheses and provide guidance for a growing literature that seeks to empirically evaluate the effects of index traders on price discovery in commodity futures markets

How Credible Are Shrinking Wage Elasticities of Married Women Labour Supply?

This paper delves into the well-known phenomenon of shrinking wage elasticities for married women in the US over recent decades. The results of a novel model experimental approach via sample data ordering unveil considerable heterogeneity across different wage groups. Yet, surprisingly constant wage elasticity estimates are maintained within certain wage groups over time. In addition to those constant wage elasticity estimates, we find that the composition of working women into different wage groups has changed considerably, resulting in shrinking wage elasticity estimates at the aggregate level. These findings would be impossible to obtain had we not dismantled and discarded the instrumental variable estimation route

Compulsory Schooling and Returns to Education: A Re-Examination

This paper re-examines the instrumental variable (IV) approach to estimating returns to education by use of compulsory school law (CSL) in the US. We show that the IV-approach amounts to a change in model specification by changing the causal status of the variable of interest. From this perspective, the IV-OLS (ordinary least square) choice becomes a model selection issue between non-nested models and is hence testable using cross validation methods. It also enables us to unravel several logic flaws in the conceptualisation of IV-based models. Using the causal chain model specification approach, we overcome these flaws by carefully distinguishing returns to education from the treatment effect of CSL. We find relatively robust estimates for the first effect, while estimates for the second effect are hindered by measurement errors in the CSL indicators. We find reassurance of our approach from fundamental theories in statistical learning

Regional Developmentalism in West Africa: The Case for Commodity-based Industrialization through Regional Cooperation in the Cocoa–Chocolate Sector

Regional integration occupies a prominent place in the economic policies of most sub-Saharan African countries. However, despite different waves of initiatives across the African continent, the majority of African regional schemes have not managed to achieve their ambitious goal of promoting sustainable development through trade integration in Africa. In light of this observation and using the West African cocoa–chocolate sector as a case study, we propose the regional developmentalism paradigm as an alternative approach to regionalism in Africa. Regional developmentalism places a particular emphasis on the use of regional and subregional approaches to development. Instead of full-fledged trade liberalization and indiscriminate economic integration, the regional developmentalism paradigm advocates for state-led trade facilitation, regulatory convergence, and capacity-building by adopting policies directed at strategic sectors. We evaluate the potential of the regional developmentalism paradigm to promote economic transformation and commodity-based industrialization against the shortcomings of the current regional integration approach embodied in the institutional framework of the Economic Community of West African States