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1 – 10 of over 23000This paper aims to investigate price responses and volatility spillovers between commodity spot and futures markets. The study ultimately seeks the evidence-based claims on the…
Abstract
Purpose
This paper aims to investigate price responses and volatility spillovers between commodity spot and futures markets. The study ultimately seeks the evidence-based claims on the efficiency of the long run and short run horizontal price transmissions from futures markets to spot markets.
Design/methodology/approach
This study used the most recent daily price series of pepper, cardamom and rubber, during the period 2004–2019, use “cointegration-ECM-GARCH framework” and verify the persisting validity of the “expectancy theory” of commodity futures pricing.
Findings
The results offer overwhelming evidence of futures market dominance in the price discoveries and volatility spillovers in spot markets. However, this paper finds asymmetric responses between cash and futures prices across markets. The hedging efficiency of futures contracts is commodities specific’ where spices futures are more efficient than the rubber futures.
Practical implications
The study passes on vital information to the producers and traders of spices and rubber who have a potential interest in the use of futures contracts to make profits from arbitrage between futures and cash markets.
Originality/value
The paper is unique in terms of understanding asymmetric price linkages in markets for plantation crops.
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Ismail Olaleke Fasanya, Temitope Festus Odudu and Oluwasegun Adekoya
This paper aims to model the relationship between oil price and six major agricultural commodity prices using monthly data from January 1997 to December 2016.
Abstract
Purpose
This paper aims to model the relationship between oil price and six major agricultural commodity prices using monthly data from January 1997 to December 2016.
Design/methodology/approach
The authors use both the linear autoregressive distributed lag by Pesaran et al. (2001) and the nonlinear autoregressive distributed lag by Shin et al. (2014), and they also account for structural breaks using the Bai and Perron (2003) test that allows for multiple structural changes in regression models.
Findings
These findings are discernible from the authors’ analyses. First, the linear analysis indicates a significant positive effect of oil prices on the agricultural commodity prices, which supports evidence on the non-neutrality hypothesis. Second, oil price asymmetries seem to matter more when dealing with agricultural commodity prices, except for groundnut. Third, it may be necessary to pre-test for structural breaks when modelling the relationship between oil price and agricultural prices regardless of the commodity being analysed. Fourth, the asymmetric effect for the agricultural commodity prices is non-neutral to oil prices, except for rice in the case of structural breaks.
Originality/value
This paper contributes to the on-going debate on the oil–agricultural commodity nexus using the recent technique of asymmetry and also considering the role structural breaks play in the relationship between oil price and agricultural commodity prices.
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George A. Zsidisin, Janet L. Hartley and Wesley A. Collins
In this article, the authors aim to describe an approach used in a purchasing/supply management course at their university that provides students with a realistic, problem‐based…
Abstract
Purpose
In this article, the authors aim to describe an approach used in a purchasing/supply management course at their university that provides students with a realistic, problem‐based learning experience with client involvement while maintaining consistent learning outcomes and a manageable faculty workload term after term. Students use a standardized approach to assess commodity price risk and decide upon an effective risk management strategy. The specific commodity that students analyze is selected by client companies who then actively participate in the course.
Design/methodology/approach
An illustrative case is presented describing how universities can partner with companies to integrate student projects into the curriculum using a standardized, repeatable process.
Findings
There are numerous benefits obtained for students, faculty, universities, and companies when engaging in commodity price analysis and risk management projects. These include the applied learning for students, providing new insights to companies, networking opportunities for students and companies that may lead to hiring, fostering closer relationships between universities and companies, providing research contacts and opportunities, and ensuring that the course is repeatable each semester.
Originality/value
The authors' approach capitalizes on the realism of client involvement while reducing the variation in learning outcomes and increased workload introduced by doing different types of client‐based company projects each term.
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Barbara Gaudenzi, George A. Zsidisin and Roberta Pellegrino
Firms can choose from an array of approaches for reducing the detrimental financial effects caused by unfavorable fluctuations in commodity prices. The purpose of this paper is to…
Abstract
Purpose
Firms can choose from an array of approaches for reducing the detrimental financial effects caused by unfavorable fluctuations in commodity prices. The purpose of this paper is to provide guidance for effectively estimating the financial effects of mitigating commodity price risk volatility (CPV) in supply chain management decisions.
Design/methodology/approach
This paper adopts two prominent and complementary methodologies, namely, total cost of ownership (TCO and real options valuation (ROV), to illustrate how commodity price risk mitigation strategies can be analyzed with respect to their effect on costs and performance. The paper provides insights through a case study to demonstrate the application of these methods together and establish the benefits and challenges associated with their implementation.
Findings
The paper illustrates advantages and disadvantages of TCO and ROV and how these approaches can be adopted together to contribute to effective purchasing decisions. Supply chain flexibility is a key capability but requires investments. Holistically measuring the financial effects of flexibility investments is imperative for gaining executive management support in mitigating commodity price volatility.
Research limitations/implications
This study can provide supply chain professionals with useful guidance for measuring the costs and benefits related to developing strategies for mitigating commodity price volatility. TCO provides a focus on the costs associated with the commodity purchasing process, and ROV enables the aggregation of all the costs and benefits associated with the use of the strategy and synthesizes them into the net value estimate.
Originality/value
The paper provides a comparison of different but complementary approaches, specifically TCO and ROV, for analyzing the effectiveness of CPV risk mitigation decisions. In addition, these two methods allow supply chain professionals to evaluate and control the financial effects of CPV risk, particularly the impact of mitigation on firm’s cash flows.
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Rexford Abaidoo, Elvis Kwame Agyapong and Kwame Fosu Boateng
This paper aims to examine the effect of volatility in prices of internationally traded commodities (the backbone of most economies) on the stability of the banking industry from…
Abstract
Purpose
This paper aims to examine the effect of volatility in prices of internationally traded commodities (the backbone of most economies) on the stability of the banking industry from three main perspectives; bank liquidity reserves, overall bank risk and bank capital adequacy.
Design/methodology/approach
Data were compiled from various sources for 30 emerging economies from 2002 to 2018 and were analyzed using the two-step system generalized method of moments estimation technique.
Findings
The study finds that all things being equal, the magnitude and direction of impact of commodity price volatility on bank stability among economies in Sub-Saharan African (SSA) depend on the type and nature of the commodity in question; and the bank stability proxy used. For instance, an increase in crude oil prices is found to foster stability in the banking industry (proxied by bank liquid reserves) but insignificant when stability in the banking industry is proxied using other banking sector parameters. Additionally, government effectiveness and corruption control have varying moderating influences on how volatility associated with prices of internationally traded commodities influence various proxies for banking industry stability.
Originality/value
This study highlights the effect of fluctuations in prices of key internationally traded commodities (adjusted for foreign exchange impact) that are important sources of revenue among economies in SSA on banking sector stability from liquidity, overall risk and capital adequacy perspectives. The influential role of governance in the relationship between volatility in the price of commodities and bank stability is also revealed by the study.
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This chapter attempts to theorize the role of knowledge in the determination of the value of commodities. This draws from the South Korean controversy on the value and price of…
Abstract
This chapter attempts to theorize the role of knowledge in the determination of the value of commodities. This draws from the South Korean controversy on the value and price of information commodities such as computer software and digital music. One group of writers has argued that the value of software copies (=commodities) is contributed by the labor time expended to produce the source code (=knowledge) in a piecemeal fashion. For another group, the source code has nothing to do with the production of the value of copies given that the source code is unnecessary for the (re)production of copies, and thus the value of software copies is approximately zero and its price is a high monopoly price. Both approaches are flawed. In the case of the former, no value can actually be transferred from the source code to copies because no changes are made to the source code before or after the production of copies. In case of the latter, knowledge is viewed as having nothing to do with value production. On the basis of this critique, an alternative view is put forward, in which knowledge plays an important role in value production by determining the productivity and/or complexity of labor. Knowledge “virtually intensifies” labor. It is also argued that intellectual property rights should be theorized in a way to refine and reproduce the role of knowledge – the virtual intensification of labor – at more complex and concrete levels of analysis.
This essay explores certain aspects of single product industry basic systems of the type Sraffa develops in Part I of Production of Commodities by Means of Commodities. It…
Abstract
This essay explores certain aspects of single product industry basic systems of the type Sraffa develops in Part I of Production of Commodities by Means of Commodities. It focusses on triangular trade as the simplest expression of the more general n-commodity case. Two elements of the framework are explored: (i) the relation of exchange between all commodities, conceived as the configuration of exchange which is applicable to the subsistence and surplus models, and (ii) the value/price expressions of labour time, applicable to the surplus model only, which posits the productivity of, remuneration to and extraction from living labour added to the system. This analysis complements and extends the Marxian reading of Sraffa’s notions of surplus and deficit industries first explored in Carter (2014b). The methodology of ‘given quantities’ in expositing the relations developed is adopted in this essay as it corresponds to the same method employed by Sraffa. This allows readers to easily move from the present essay to Sraffa’s book and importantly his archival notes which are now for all interested parties available as colour digital images on the Wren Library website.
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Cleyton Farias and Marcelo Silva
The authors explore the hypothesis that some movements in commodity prices are anticipated (news shocks) and can trigger aggregate fluctuations in small open emerging economies…
Abstract
Purpose
The authors explore the hypothesis that some movements in commodity prices are anticipated (news shocks) and can trigger aggregate fluctuations in small open emerging economies. This paper aims to discuss the aforementioned objective.
Design/methodology/approach
The authors build a multi-sector dynamic stochastic general equilibrium model with endogenous commodity production. There are five exogenous processes: a country-specific interest rate shock that responds to commodity price fluctuations, a productivity (TFP) shock for each sector and a commodity price shock. Both TFP and commodity price shocks are composed of unanticipated and anticipated components.
Findings
The authors show that news shocks to commodity prices lead to higher output, investment and consumption, and a countercyclical movement in the trade-balance-to-output ratio. The authors also show that commodity price news shocks explain about 24% of output aggregate fluctuations in the small open economy.
Practical implications
Given the importance of both anticipated and unanticipated commodity price shocks, policymakers should pay attention to developments in commodity markets when designing policies to attenuate the business cycles. Future research should investigate the design of optimal fiscal and monetary policies in SOE subject to news shocks in commodity prices.
Originality/value
This paper contributes to the knowledge of the sources of fluctuations in emerging economies highlighting the importance of a new source: news shocks in commodity prices.
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