Commodity Sector Research Articles

Effects of Expansionary Fiscal Policy in a Commodity-Exporting Economy: Evidence from Mongolia

Abstract This study contributes to the ongoing debate on the consequences of expansionary fiscal policy by evaluating the macroeconomic effects of various fiscal policy options in a small open economy using a dynamic stochastic general equilibrium (DSGE) model. In addition, the study emphasizes the importance of studying Mongolia, which has unique characteristics and exhibits significant research gaps regarding its fiscal policy. The general architecture of the selected DSGE model includes different types of firms and households, commodity sectors, natural resource funds, and abundant fiscal tools regarding both expenditure and revenue. Employing numerous types of fiscal policy shocks, this study reveals that an exogenous increase in government investment yields the most significant long-term economic benefits, boosting potential output by 0.3%. Among the policy options, government transfers are the least effective in promoting economic output, and existing transfer policies in Mongolia appear to exert only a modest impact on growth, instead primarily contributing to the redistribution of resources. Finally, the estimated output multipliers (except transfers) are greater than one, implying that fiscal policy instruments may be an effective tool for managing the economy in Mongolia. JEL classification numbers: E17, E62, H24, H54, H55. Keywords: Fiscal policy, Fiscal policy multiplier, Small open economy, Dynamic Stochastic General Equilibrium model, Natural Resource Sector.

Komoditas Unggulan dan Daya Saing Sektor Pertanian Kabupaten Tanah Datar

The agricultural sector has an important role in economic development. Determination of superior commodities in an area is the first step of development based on the concept of comparative and competitive advantage. This study aims to (1) analyze the leading commodities in Tanah Datar Regency (2) analyze the competitiveness of the leading commodities in Tanah Datar Regency (3) analyze the specialization and localization of superior commodities in Tanah Datar Regency. This research uses Location Quotient analysis, Dynamic Location Quotient, Shift Share Analysis, Specialization Quotient and Localization Quotient. The data used are secondary data, namely the production of the food crop sub-sector, horticulture sub-sector, and plantation sub-sector from 2016 to 2020. The results of the analysis show that (1) the percentage of agricultural sector commodities that are superior in Tanah Datar Regency is 40 percent, with the percentage of potential future superior commodities in Tanah Datar Regency is 63 percent (2) the percentage of competitive superior commodities in Tanah Datar Regency is 47 percent (3) the percentage of specialization and localization of superior commodities is 21 percent. From the results of the analysis, it is hoped that the government will direct the development of the agricultural sector with a focus on efforts to increase productivity, develop, and socialize superior agricultural commodities.

Quantile connectedness of the Chinese commodity sectors

ABSTRACTThis article employs the QVAR model to investigate the return spillovers of China’s commodity sectors. Our results show that the total connectedness in extreme markets is significantly higher and increases as the size of the shock increases. Livestock has changed from a risk contributor to a risk recipient due to the low or even negative tail correlation in extreme markets. These findings can help prevent systemic risks for policymakers and re-optimize the portfolios to reduce tail losses for investors in extreme markets.

Mass balance accounting: Considerations for circular polymers

AbstractWhile plastic packaging and products have greatly benefitted civilization, the current and historical approaches to design, use, and end‐of‐life management have resulted in significant challenges, particularly in recovering and retaining the economic value of the materials and preventing plastic pollution. The dominant route for recycling plastic in the United States and elsewhere has been mechanical recycling, which is effective for select polymer types and package designs and has potential for growth. However, several regulatory, technical, and economic challenges will ultimately cap the fraction of plastic waste recovered by mechanical recycling technologies, and as a result, chemical recycling―processes that either break covalent bonds or otherwise exploit fundamental chemical processes to return molecules to early or mid‐stage chemical production―has great appeal, especially for plastic products most challenging for mechanical recycling. Due to the nature of some chemical recycling technologies, specifically that molecules derived from chemically recycled polymers become indistinguishable from primary feedstocks and thus not traceable or measurable in the process, the mass balance (MB) accounting chain of custody model has been proposed as a tool to track, trace, and certify circular polymers. While MB certification standards have an extensive history in other commodity sectors, they have only recently been considered in the polymers sector in part due to recent technology advances and incentives to expand chemical recycling. Here we discuss the roll of MB in polymer circularity, including controversial aspects, and provide technical examples to describe its potential applicability. We further provide recommendations for the effective use of MB to certify circular polymers.This article is categorized under: Climate and Environment > Pollution Prevention Climate and Environment > Circular Economy Emerging Technologies > Materials

Daya Saing Komoditas Unggulan Sektor Pertanian dalam Pembangunan Ekonomi Kabupaten Solok

Agriculture is a sector that has opportunities for regional economic development. The development of a region can be done by determining superior commodities that can compete comparatively and competitively. This study aims to analyze the excellent things in the agricultural sector and the competitiveness of fantastic items in Solok Regency. The research was done in Solok Regency from May to July 2022 using Location Quotient, Dynamic Location Quotient, Shift Share Analysis, and Growth Ratio Model (MRP) analysis. The research uses secondary data, namely the production value of the food crops sub-sector, the horticulture sub-sector, and the estate sub-sector from 2016 to 2020. The analysis results show that the superior agricultural sector commodities in Solok Regency are 27 commodities, of which 14 in the future have no potential to be developed, leading things that have a competitive advantage in Solok Regency, namely as many as 16 commodities, with 12 items that are growing well. From the analysis results, the government should focus more on regional development by optimizing the progress of superior agricultural commodities that are competitive and able to improve the economy in Solok Regency.

The impact of ESG ratings on the market performance of commodity stock sector before and during the COVID-19 pandemic

Motivation: The growing importance of ESG in the international economy makes the analysed issues extremely interesting. More and more studies show the growing role of ESG performance on company financial and market results as well as analyse the impact of the COVID-19 pandemic on the financial market. The study of rate of return and the relationship between the largest company companies in European Union Member States is of key importance considering the investment portfolio risk.Aim: The main aim of the article is impact assessment of ESG performance of the firm (proxied by ESG scoring by Refinitiv) on the rate of return of commodity sector companies listed on financial markets of European Union Member States. The second goal of the paper is to determine the impact of the COVID-19 pandemic on the rate of return of the analysed companies. The third and final goal is to assess the impact of sector leader status on the rate of return of these companies (i.e. KGHM, PKN Orlen, Royal Dutch Shell and Rio Tinto).Results: ESG disclosure by the surveyed companies and ESG scoring had negative impact on the rate of return, while E, S and G scorings did not affect rate of return at all. Sector leaders were less negatively impacted by the COVID-19 economic crisis than the rest of the sector, however sector leadership status was not statistically significant. COVID-19 pandemic positively influenced the rate of return of analysed companies. In case of commodities stock companies, the economic crisis caused by the pandemic brought about higher levels of uncertainty in the financial markets.

Introduction to symposium supply chain trade in Africa: Retrospect and prospect

AbstractThe symposium focuses on the evolution and determinants of Africa's participation in Global Value Chains (GVC) through comparisons with other continents, but also across countries within Africa. Using firm, sector and country‐level data they provide a comprehensive micro and macroeconomic analysis of GVC in Africa that helps inform policymakers aiming at increasing Africa's participation in GVC. Three policy areas are identified. First, encouraging FDI and better governance are important drivers of GVC participation through vertical and horizontal linkages. Second, promoting production capacity through industrial policies that aim at learning by exporting and internet connectivity can help diversify African GVC, which is heavily concentrated in the commodity sector, towards the manufacturing and services sectors with higher value‐added. Finally, there is a need to increase the downstreamness of Africa's participation in GVC, not only because it moves Africa towards sectors with high value‐added but also because it would make Africa's production more environmentally sustainable.

Research on Trend Investing Strategy and Hedging Strategy

An investment method based on traditional subjective judgments faces huge challenges, while the strategy of quantitative investment is to find the optimal alpha model to judge the best timing of selling and buying and designing the most effective investment portfolio. Therefore, compared with traditional investment methods, quantitative investment breaks through the limitations of subjective judgment with its qualitative and quantitative advantages. The futures market attracts many investors with its low transaction costs and the two-way nature of transactions. However, most of the investment strategies that are frequently used in the market have low stability and do not guarantee correlation with the general market trend. This makes the investments risky, particularly for individual investors. Therefore, this paper will explore both futures investment and risk hedging strategies, aiming to ensure that every buy and sell is the correct choice as much as possible, such that futures investment is relatively stable and has high returns. This article focuses on using the moving average cross strategy through the python programming language to achieve the judgment of buying and selling in the process of futures trading and drawing the net worth curve of the real-time futures market data and perform a correlation analysis to determine which commodity sector is the most suitable using the trend strategy. For risk hedging, the article mainly uses the correlation analysis to study the relation between the prices of different types of futures. Furthermore, the futures and options market price fluctuations are discussed in depth, and also analysed is how to use and balance hedge parameters for risk hedging.

Connectedness between carbon and sectoral commodity markets: Evidence from China

The carbon market is an efficient mechanism to reduce CO2 emissions and thus respond to climate change. This work reveals the connectedness and its determinants between carbon and sectoral commodity markets in China. For this purpose, we apply the newly developed quantile-based connectedness measures that allow us to distinguish the relationship between markets under normal and extreme market conditions. The results indicate that: (i) the total spillovers in the carbon-commodity system in both tails are apparently bigger than that at the middle quantile, and are obviously affected by the Russia-Ukraine conflict; (ii) carbon markets receive more information from carbon-intensive commodity markets than from relatively low-carbon commodity markets in both tails; (iii) carbon markets mainly exhibit commodity attributes under normal market conditions, but exhibit commodity and financial attributes under extreme market conditions; and (iv) the spillovers between carbon and commodity markets are more influenced by monetary policy factors in both tails.

The Impact of Gross Domestic Product Response to the Money Supply Shock in the Iraqi Economy for the Period (2004-2021)

The research aims to clarify the response of the GDP to the M1 shock. It includes access to the results using standard methods, where the standard model was built according to quarterly data using the program STATA 17. According to the joint integration model ARDL, the research found a long-term equilibrium positive for the relationship between GDP and the money supply in Iraq, as the change in the money supply by a certain percentage will lead to a change in GDP by about 71% of that percentage. In the event of a shock in the Iraqi economy, the impact of the M1 will differ from what it was before the shock, as the shock will increase its effectiveness towards GDP by about 10% more than before the shock. At the same time, the relationship between them remains positive. One of the most important recommendations is to work to achieve a proportional balance between the money supply and GDP. This is done through the control of monetary policy to reach a real balance between the monetary and commodity sectors. It contributes to addressing the chronic imbalances of most economic sectors, especially in productivity and its vulnerability to monetary economic shocks.
 Paper type: Research paper.

Which Commodity Sectors Effectively Hedge Emerging Eastern European Stock Markets? Evidence from MGARCH Models

This study aims at examining whether hedging emerging Eastern Europe stock markets with commodities sectors can help in reducing market risks and whether it has the same effectiveness among different sectors. As an attempt to achieve this goal, we opt for three types of MGARCH model. These are DCC, ADCC and GO-GARCH, which are used with each bivariate series to model dynamic conditional correlations, optimal hedge ratios and hedging effectiveness. Rolling window analysis is used for out-of-sample one-step-ahead forecasts from December 1994 to June 2022. The results have shown that the commodities sectors of industrial metals and energy represent the optimal hedging instruments for emerging Eastern Europe stock markets as they have the highest hedging effectiveness. Additionally, our empirical results have proved that hedge ratios estimated by the DCC and ADCC models are very similar, which is not the case for GO-GARCH, and that hedging effectiveness is preferably estimated by the ADCC model.

Dynamic connectedness between global commodity sectors, news sentiment, and sub-Saharan African equities

We examine the static and time-varying spillovers between global commodity sectors, economic news sentiment, and sub-Saharan African (SSA) equities. In a time-varying parameter vector autoregressions spillover connectedness approach, we find that: (i) there are significant spillovers between SSA equities, economic news sentiment, and global commodity sectors; (ii) the connectedness evolves across different times and is amplified by market crises; (iii) there are suitable market-specific SSA equities that bear safe-haven and hedge attributes for global commodity investors; (iv) agriculture is the main source of return and volatility spillovers; and (v) economic news sentiment index is a net transmitter of spillover during systemic crisis periods such as GFC and the COVID-19 pandemic. Our findings have notable implications for international investors, regulators, and practitioners.

Market of milk and products of its processing in the Akmola region of the Republic of Kazakhstan: current situation, resources

The article describes the current state of dairy cattle breeding in the Akmola region. The specifics of functioning of the regional market of dairy products are considered. The total volume of demand for milk and products of its processing was determined, calculated taking into account the recommended consumption rates, separately for the urban and rural population. The goal is to study the current situation in the retail chains of the region with dairy products and the prospects for expanding their range. Methods – economic-statistical, balance, abstract-logical for summarizing industry information from open access sources and scientific literature. Results – the authors note that the development of the dairy subcomplex is accompanied by a steady increase in the volume of dairy production, this was facilitated by an increase in productivity of cows in agricultural enterprises, and in households and peasant (farm) farms an increase in the number of animals. A high share of the small-scale commodity sector has been established. Conclusions – the predominance in the structure of the dairy industry of personal subsidiary farms (PSF), which are characterized by low milk yield, quality and marketability of raw milk, causes a shortage of raw materials. Combining them into agricultural cooperatives will make it possible to fully realize their potential, therefore, ensure the workload of milk processing enterprises, expand the food sales market, stimulate the transformation of household plots into larger commodity structures and increase the incomes of the villagers. It is necessary to improve the legislative framework for the use of budget funds for public procurement, primarily from domestic producers at guaranteed prices, to develop recommendations for regulating imports and exports of products for effective price competition through customs and tariff policy.

Trade effects of voluntary sustainability standards in tropical commodity sectors

This article investigates the trade implications of voluntary sustainability standards (VSS) in tropical commodity sectors. VSS are increasingly important, not only in corporate sustainability strategies, but also in trade policy, thereby shifting the responsibility for the governance of sustainability in the food system from the public to the private sector. There is no regulatory framework assuring that VSS do not distort trade while effectively delivering environmental and social sustainability benefits, and conclusive evidence on the trade effects of VSS is lacking. We compile an innovative database of country-level VSS coverage for five tropical commodities, seven VSS observed for seven years, and use a multi-country, -sector and -standard augmented gravity analysis to estimate the trade effects of VSS adoption. Our results confirm a general trade-enhancing effect of VSS, with on average a one pp increase in VSS coverage resulting in a 1.8 to 3.3% increase in export value. Effects are largest for banana, followed by coffee and tea – and are insignificant for cocoa and palm oil. The trade-enhancing effect of VSS certification does not vary with the income level of the exporter but increases with the income level of the importer and with the income gap between trading partners. Our results imply that VSS can be an effective tool to overcome the trade-inhibiting effect of governance distance between countries. Yet, for VSS to effectively reconcile international food trade with sustainability goals, policy attention is needed to VSS adoption and impact in the poorest countries.

Industrialization in East Java Province

The manufacturing industry’s contribution to East Java’s economy is high. Still, the trend continues to decline, while the contribution of the trade, hotel, and restaurant sectors is increasing. This indicates that there has been a shift in the economic structure from industry to trade. This research uses a quantitative approach based on the classification carried out by UNIDO (United Nations Industrial Development Organization) and the World Bank. The results of secondary data from Central BPS and East Java Province BPS show that East Java Province is categorized as a semi-industrial area. East Java’s industrial development is experiencing a decline from the “semi- industrialization” stage to the “towards industrialization” stage. This is an early indication of a decline in industrialization or deindustrialization in East Java. If the stages of industrialization in East Java have decreased, but not for commodity industrialization (the ratio of the manufacturing industry’s contribution to the commodity sector). The value of commodity industrialization continues to increase. The commodity sector includes agriculture, mining, industry, construction, electricity, gas & drinking water.

Risk implications of dependence in the commodities: A copula-based analysis

The study aims to quantify the risk between oil and a broad sample of commodities using copulae tools to model the dependence structures. Using daily returns of commodity futures from October 3, 2005, to January 21, 2022, we find that in contrast with conventional wisdom, a C-Vine outperforms D- and R-Vine in modeling the multivariate dependence structure among commodities. We then compare the efficiency of copula-based models against traditional models in forecasting the portfolio and systemic risk in the commodities sector. The findings suggest that copula-based models are more effective than traditional models in forecasting portfolio and systemic risk.

Reaction of the Indonesian capital market to the conflict between Russia and Ukraine: Event study approach to abnormal returns and trading volume activity of coal issuers' shares on the IDX

The peak of tensions between Russia and Ukraine occurred on 24 February 2022, the day the first attacks were carried out. This event caused turmoil on global financial markets, especially the G20 countries including Indonesia. Commodity sectors such as coal on the IDX gained sentiment from the outbreak of this event. This research uses an event study approach and will focus on the reaction of the Indonesian capital market in the coal sub-sector when the military conflict between Russia and Ukraine broke out. Market reaction in this study will be measured by abnormal returns and trading volume activity. This study used 29 samples from coal issuers. Data obtained from the IDX.CO.ID website. This study found that abnormal returns and trading volume activity in the coal sub-sector experienced significant differences between before and after the conflict occurred.

Strategi Pengembangan Produksi Pertanian Sektor Hortikultura di Kecamatan Mallusetasi, Kabupaten Barru

Mallusetasi District, Barru Regency is trying to improve the agricultural sector in horticultural commodities. Horticultural crops are the mainstay, although it is not yet known and determined which leading horticultural sector will be developed by related parties, in this case the local government. This study aims to analyze the base sector in Mallusetasi District, Barru Regency. The method used in this study is location quotient (LQ) analysis to determine the base sector, dynamic location quotient (DLQ) analysis to determine development potential this year and the next few years and SWOT analysis to determine strategies in developing base sector commodities in Mallusetasi District. The results showed that the horticultural commodity which became the basis sector with superior classification was watermelon. In the development effort through SWOT analysis it was found that the watermelons cultivated in Mallusetasi District were in a position to grow and develop with an aggressive strategy which meant that farmers had to be able to use their power to optimize the use of opportunities in the form of assistance from the government, market access and superior seeds for horticultural commodities.

Exploring the dynamic connectedness between commodities and African equities

Market participants, regulators, and practitioners might have disregarded the prospective integration of African markets and the integration of commodity markets with traditional markets. We examine the nonhomogeneous return spillovers and contagion between 12 commodity sectors and African equities under the time-varying parameter vector autoregressions connectedness method. With daily datasets from February 2010 to February 2022, the average connectedness analysis suggests a low spillover transmission between commodities and respective African equity markets. We reveal that the return connectedness between commodities and African equities is largely driven by idiosyncratic spillovers. The results from the dynamic connectedness analysis reveal significant spillovers between the studied markets. Our findings underscore financial market contagion during stressed trading periods, suggesting that global commodity and African equity markets are not entirely immune to global market shocks. Therefore, prompt management of commodity price volatility and the integration between economies could result in controlled impacts of financial market contagion. Portfolio managers should deploy effective risk management strategies that capitalise on the nonhomogeneous roles of some assets as diversifiers, hedges, and safe havens across time horizons. Additional implications of our findings are discussed.

Impacts of the COVID-19 pandemic on export commodity trading

This study examines the impact of COVID-19 on the export commodity sector in North Kalimantan province, Indonesia. The sector’s heavy reliance on hydrocarbon, seafood, and agricultural products, and lack of diversification in the commodity market pose significant risks to its long-term sustainability and growth. Studies critically analysing the trading of this commodity and the pandemic’s impacts on this sector remain lacking. Using a content analysis approach on data and information sourced from government reports and statistics, this qualitative-based study provides insight into the impacts of the COVID-19 pandemic and its resultant government intervention measures on North Kalimantan’s export commodities. Findings show that export commodities handled by the province’s ports decreased by 7 percent from 2019 to 2020, but in 2021, export values almost doubled compared to pre-COVID levels. The province’s economic growth has been heavily dependent on hydrocarbon, seafood, and agricultural products before and during the pandemic. To create a more business-friendly environment and reverse the downward trend of export commodities, the study suggests diversifying the commodity market, enhancing human resource capacity, and forging stronger private-public partnerships. The study provides insight into the effects of the pandemic on North Kalimantan’s export commodity sector, highlighting the need for long-term sustainability strategies.