Market Prices and Food Aid Local and Regional Procurement and Distribution: A Multi-Country Analysis

To date, no research has rigorously addressed the concern that local and regional procurement (LRP) of food aid could affect food prices and food price volatility in food aid source and recipient countries. We assemble spatially and temporally disaggregated data and estimate the relationship between food prices and their volatility and local food aid procurement and distribution across seven countries for several commodities. In most cases, LRP activities have no statistically significant relationship with either local price levels or food price volatility. The few exceptions underscore the importance of market monitoring. (C) 2013 Elsevier Ltd. All rights reserved.

Price risk management in the copper market using commodity derivatives and options strategies

Metals price risk management is a key issue related to financial risk in metal markets because of uncertainty of commodity price fluctuation, exchange rate, interest rate changes and huge price risk either to metals’ producers or consumers. Thus, it has been taken into account by all participants in metal markets including metals’ producers, consumers, merchants, banks, investment funds, speculators, traders and so on. Managing price risk provides stable income for both metals’ producers and consumers, so it increases the chance that a firm will invest in attractive projects. The purpose of this research is to evaluate risk management strategies in the copper market. The main tools and strategies of price risk management are hedging and other derivatives such as futures contracts, swaps and options contracts. Hedging is a transaction designed to reduce or eliminate price risk. Derivatives are financial instruments, whose returns are derived from other financial instruments and they are commonly used for managing financial risks. Although derivatives have been around in some form for centuries, their growth has accelerated rapidly during the last 20 years. Nowadays, they are widely used by financial institutions, corporations, professional investors, and individuals. This project is focused on the over-the-counter (OTC) market and its products such as exotic options, particularly Asian options. The first part of the project is a description of basic derivatives and risk management strategies. In addition, this part discusses basic concepts of spot and futures (forward) markets, benefits and costs of risk management and risks and rewards of positions in the derivative markets. The second part considers valuations of commodity derivatives. In this part, the options pricing model DerivaGem is applied to Asian call and put options on London Metal Exchange (LME) copper because it is important to understand how Asian options are valued and to compare theoretical values of the options with their market observed values. Predicting future trends of copper prices is important and would be essential to manage market price risk successfully. Therefore, the third part is a discussion about econometric commodity models. Based on this literature review, the fourth part of the project reports the construction and testing of an econometric model designed to forecast the monthly average price of copper on the LME. More specifically, this part aims at showing how LME copper prices can be explained by means of a simultaneous equation structural model (two-stage least squares regression) connecting supply and demand variables. A simultaneous econometric model for the copper industry is built: {█(Q_t^D=e^((-5.0485))∙P_((t-1))^((-0.1868) )∙〖GDP〗_t^((1.7151) )∙e^((0.0158)∙〖IP〗_t ) @Q_t^S=e^((-3.0785))∙P_((t-1))^((0.5960))∙T_t^((0.1408))∙P_(OIL(t))^((-0.1559))∙〖USDI〗_t^((1.2432))∙〖LIBOR〗_((t-6))^((-0.0561))@Q_t^D=Q_t^S )┤ P_((t-1))^CU=e^((-2.5165))∙〖GDP〗_t^((2.1910))∙e^((0.0202)∙〖IP〗_t )∙T_t^((-0.1799))∙P_(OIL(t))^((0.1991))∙〖USDI〗_t^((-1.5881))∙〖LIBOR〗_((t-6))^((0.0717) Where, Q_t^D and Q_t^Sare world demand for and supply of copper at time t respectively. P(t-1) is the lagged price of copper, which is the focus of the analysis in this part. GDPt is world gross domestic product at time t, which represents aggregate economic activity. In addition, industrial production should be considered here, so the global industrial production growth that is noted as IPt is included in the model. Tt is the time variable, which is a useful proxy for technological change. A proxy variable for the cost of energy in producing copper is the price of oil at time t, which is noted as POIL(t ) . USDIt is the U.S. dollar index variable at time t, which is an important variable for explaining the copper supply and copper prices. At last, LIBOR(t-6) is the 6-month lagged 1-year London Inter bank offering rate of interest. Although, the model can be applicable for different base metals' industries, the omitted exogenous variables such as the price of substitute or a combined variable related to the price of substitutes have not been considered in this study. Based on this econometric model and using a Monte-Carlo simulation analysis, the probabilities that the monthly average copper prices in 2006 and 2007 will be greater than specific strike price of an option are defined. The final part evaluates risk management strategies including options strategies, metal swaps and simple options in relation to the simulation results. The basic options strategies such as bull spreads, bear spreads and butterfly spreads, which are created by using both call and put options in 2006 and 2007 are evaluated. Consequently, each risk management strategy in 2006 and 2007 is analyzed based on the day of data and the price prediction model. As a result, applications stemming from this project include valuing Asian options, developing a copper price prediction model, forecasting and planning, and decision making for price risk management in the copper market.

Selection and hydroponic growth of bread wheat cultivars for bioregenerative life support systems

As part of the ESA-funded MELiSSA program, the suitability, the growth and the development of four bread wheat cultivars were investigated in hydroponic culture with the aim to incorporate such a cultivation system in an Environmental Control and Life Support System (ECLSS). Wheat plants can fulfill three major functions in space: (a) fixation of CO2 and production of O2, (b) production of grains for human nutrition and (c) production of cleaned water after condensation of the water vapor released from the plants by transpiration. Four spring wheat cultivars (Aletsch, Fiorina, Greina and CH Rubli) were grown hydroponically and compared with respect to growth and grain maturation properties. The height of the plants, the culture duration from germination to harvest, the quantity of water used, the number of fertile and non-fertile tillers as well as the quantity and quality of the grains harvested were considered. Mature grains could be harvested after around 160 days depending on the varieties. It became evident that the nutrient supply is crucial in this context and strongly affects leaf senescence and grain maturation. After a first experiment, the culture conditions were improved for the second experiment (stepwise decrease of EC after flowering, pH adjusted twice a week, less plants per m2) leading to a more favorable harvest (higher grain yield and harvest index). Considerably less green tillers without mature grains were present at harvest time in experiment 2 than in experiment 1. The harvest index for dry matter (including roots) ranged from 0.13 to 0.35 in experiment 1 and from 0.23 to 0.41 in experiment 2 with modified culture conditions. The thousand-grain weight for the four varieties ranged from 30.4 to 36.7 g in experiment 1 and from 33.2 to 39.1 g in experiment 2, while market samples were in the range of 39.4–46.9 g. Calcium levels in grains of the hydroponically grown wheat were similar to those from field-grown wheat, while potassium, magnesium, phosphorus, iron, zinc, copper, manganese and nickel levels tended to be higher in the grains of experimental plants. It remains a challenge for future experiments to further adapt the nutrient supply in order to improve senescence of vegetative plant parts, harvest index and the composition of bread wheat grains.

Effect of Frame Size and Hormone Implant on Performance and Carcass Characteristics of Finishing Yearling Heifers: Returns to a Value-Based Market

Four groups of yearling heifers representing different frame sizes—small, medium, and large Angus and medium Simmental—were fed high-grain finishing diets to average Low Choice quality grade. Half the heifers were implanted with estrogen and trenbolone acetate. Backfat and ribeye area were measured by ultrasound four times during the study to assess growth of muscle and fat. Increasing frame size resulted in increased feed intake, greater rates of gain, and a trend towards reduced feed conversion. Greater returns would have been realized from each of the four groups had they been sold in a premium market based on yield grade rather than the conventional grade and yield market. Increasing frame size resulted in greater returns to the value-based market. Implants increased rate of gain and improved feed conversion but did not result in significantly greater returns to the value-based market compared with the grade and yield market. Ribeye area and backfat increased with body weight and time on feed. Increase in ribeye area was linear with time, whereas accumulation of backfat was exponential. Rate of increase in area of ribeye tended to increase and backfat tended to decrease as frame size increased. Implants increased rate of increase in ribeye area but had no effect on rate of deposition of subcutaneous fat. Equations describing growth of ribeye area and backfat for each group predicted average growth for the heifers but did not predict growth of individual heifers. Final carcass yield grade was related to initial thickness of backfat but not to initial ribeye area. These results indicate that the type of cattle selected to be fed for a premium market based on yield grade is important to the success of the program. More work is needed to develop growth equations from ultrasound measurements, but ultrasound will likely be a useful tool in selecting feeder cattle for a value-based market.

Economic Reforms and Pro-Poor Growth: Lessons for Africa and other Developing Regions and Economies in Transition

The paper discusses the meaning and measurement of pro-poor growth and also reviews evidence of pro-poor growth (or the lack of it) in a large cross-section of countries and time periods. The emerging story is that many episodes of growth are not pro-poor and also that although economic reforms have had positive effects in those countries that have been steadfast in implementing market reforms, the overall impact on growth has been small for many countries and in most cases not pro-poor. I present a general theory of pro-poor growth that includes ten principles that should be incorporated in all economic reforms that seek to generate pro-poor growth. These principles highlight the importance of understanding the poor, their economic activities, capabilities, constraints that impede their participation in markets and also an appreciation of linkages within sectors and regions. It is argued that pro-poor reforms cannot have the intended impact unless there are significant changes in the institutions of governance. Finally, the principles presented underscore the fact that pro-poor growth policies cannot be sustained without workable partnerships between markets and states in the ever changing and complex processes of social and economic development.

Increasing Derivatives Market Activity in Emerging Markets and Exchange Rate Exposure

Understanding the effects of off-balance sheet transactions on interest and exchange rate exposures has become more important for emerging market countries that are experiencing remarkable growth in derivatives markets. Using firm level data, we report a significant fall in exposure over the past 10 years and relate this to higher derivatives market participation. Our methodology is composed of a three stage approach: First, we measure foreign exchange exposures using the Adler-Dumas (1984) model. Next, we follow an indirect approach to infer derivatives market participation at the firm level. Finally, we study the relationship between exchange rate exposure and derivatives market participation. Our results show that foreign exchange exposure is negatively related to derivatives market participation, and support the hedging explanation of the exchange rate exposure puzzle. This decline is especially salient in the financial sector, for bigger firms, and over longer time periods. Results are robust to using different exchange rates, a GARCH-SVAR approach to measure exchange rate exposure, and different return horizons.

Endogenous Growth in the Presence of Informal Credit Markets: A Comparative Analysis Between Credit Rationing and Self-Revelation Regimes

This paper examines whether the presence of informal credit markets reduces the cost of credit rationing in terms of growth. In a dynamic general equilibrium framework, we assume that firms are heterogenous with different degrees of risk and households invest in human capital development. With the help of Indian household level data we show that the informal market reduces the cost of rationing by increasing the growth rate by 0.7 percent. This higher growth rate, in the presence of an informal sector, is due to the ability of the informal market to separate the high risk from the low risk firms thanks to better information. But even after such improvement we do not get the optimum outcome. The findings, based on our second question, suggest that the revelation of firms' type, based on incentive compatible pricing, can lead to almost 2 percent higher growth rate as compared to the credit rationing regime with informal sector.

Value Chain Dynamics and Growth of Local Firms:The Case of Motorcycle Industry in Vietnam

Vietnam’s burgeoning market for motorcycles has attracted global industry eaders,players from developing countries, and local firms. This has led to a dynamic evolution of value chains. This paper presents an explanation of the varieties of the growth patterns xperienced by the local suppliers, focusing on the roles of customer and local supplier strategies. Case studies showed that while the role of customers may be important, strategies of suppliers to improve the ompetitive edge in the production of otorcycle components and to diversify into other products account for important ariations of growth trajectories among local suppliers. Findings presented in this paper suggest the need to direct more attention to strategy that local firms use to boost their competitive edge in business.

Clothing Export from sub-Saharan Africa : Impact on Poverty and Potential for Growth

Increases in clothing exports after 2000 signaled the first incidence of large-scale manufacturing exports from sub-Saharan Africa. Using firm-level information, this paper explores the potential of clothing exports for poverty reduction and further growth as seen in other low income countries. It shows that the garment exporting industries in Kenya and Madagascar have contributed poverty reduction in the short term by providing mass employment for female and less educated workers with wages beyond the poverty line. However, the long-term impact is not certain. High production costs and limited development of local firms weaken potential for further growth in the competitive world market. Upgrading of the market and improvement of efficiency are required to remain competitive for African industries, and governmental support for local participation are needed to facilitate technology transfer.

The Feasibility of Cuban Market Economy: A Comparison with Vietnam

In spite of the difficulties incurred by its people, Cuba has maintained a centrally planned economy with single party system. On the contrary, Vietnam has introduced a market economy under communist rule, and succeeded in generally improving living standards. The factors that contributed to the introduction of Vietnamese-style reforms are (1) severe economic crisis, (2) demonstration effects from neighboring countries, (3) poor social policy, (4) initiatives by ex-conservative leader/s, and (5) weak state capacity. The conditions to sustain high economic growth are (1) social sectors familiar with capitalist economics, (2) abundant labor forces with relatively low labor cost, and (3) investment by exiles. This paper analyzes to what extent Cuba meets these conditions.

The Technology Gap and the Growth of the Firm: A Case Study of China's Mobile-phone Handset Industry

We have examined the way in which local Chinese firms confronted with a technology gap have achieved growth, using the Chinese handset industry as a case study. Chinese local firms have lacked technology, and have therefore turned to outside firms for development, design, and manufacturing, while they themselves have focused on sales and marketing, using their advantage of familiarity with the Chinese market. Consequently, by establishing a growth condition in which their selection of boundaries counterbalances the technology gap they have been able to expand their market share in comparison with foreign firms.

Chapter 5 Industrial Policy, Structure, and Locations during the Transition toward a Market-oriented Economy in Myanmar

This paper examines Myanmar's industrial policy, structure, and locations during the transition from a centrally planned economy to a market-oriented one throughout the 1990s and up to the present. After the military government assumed power in 1988, it abandoned the socialist centrally planned economic system and began instituting a market-oriented one through a series of liberalization and deregulation measures, although most of which have stalled since 1997 and remain half-way implemented. Against this background, it is rather surprising that the impact of these new policies of international trade, finance, regulations, licensing and ownership requirements on industrial structure and location in Myanmar has been poorly documented and examined to date. Some key issues to understanding the impact and effectiveness of the market-oriented policies during the last two decades in Myanmar remain to be answered: Have the new trade and industrial policies changed the industrial structure and organizational behavior in Myanmar? Have they improved the performance of Myanmar's industrial sector? Have they had any impact on industry location in Myanmar? This paper reviews the series of liberalization programs implemented under the military government?the State Law and Order Restoration Council (SLORC) and the State Peace and Development Council (SPDC)?and assesses their impact on industrial structure and its spatial distribution.

Growth strategies in a greener world

Two new developments in the global landscape - growing concerns towards global warming and the rising prices of commodities – require countries to craft new growth strategies. These recent developments in the global market offer fresh industrial opportunities as well as difficulties for developing countries embarking on industrialization. In this paper, we examine current developments in global market that would affect industrialization prospects in East Asia and explores development strategies that are suitable for development based on export oriented manufacturing industries in a green world.

Myanmar's two decades of partial transition to a market economy : a negative legacy for the new government

Despite more than two decades of transition from a centrally planned to a market-oriented economy, Myanmar’s economic transition is still only partly complete. The government’s initial strategy for dealing with the swelling deficits of the state economic enterprises (SEEs) was to put them under direct control in order to scrutinize their expenditures. This policy change postponed restructuring and exacerbated the soft budget constraint problem of the SEEs. While the installation of a new government in March 2011 has increased prospects for economic development, sustainable growth still requires full-scale structural reform of the SEEs and institutional infrastructure building. Myanmar can learn from the gradual approaches to economic transition in China and Vietnam, where partial reforms weakened further impetus for reforms.

Evaluation of the trading development in the Iberian Energy Derivatives Market

The efficiency of the Iberian Energy Derivatives Market in its first five and a half years is assessed in terms of volume, open interest and price. The continuous market shows steady liquidity growth. Its volume is strongly correlated to that of the Over The Counter (OTC) market, the amount of market makers, the enrolment of financial agents and generation companies belonging to the integrated group of last resort suppliers, and the OTC cleared volume in its clearing house. The hedging efficiency, measured through the ratio between the final open interest and the cleared volume, shows the lowest values for the Spanish base load futures as they are the most liquid contracts. The ex-post forward risk premium has diminished due to the learning curve and the effect of the fixed price retributing the indigenous coal fired generation. This market is quite less developed than the European leaders headquartered in Norway and Germany. Enrolment of more traders, mainly international energy companies, financial agents, energy intensive industries and renewable generation companies is desired. Market monitoring reports by the market operator providing post-trade transparency, OTC data access by the energy regulator, and assessment of the regulatory risk can contribute to efficiency gains.