Impact Of Supply Shocks Research Articles

The U.S. Sweet Potato Market: Price Response and Impact of Supply Shocks

Sweet potatoes have become increasingly popular among consumers due to their health benefits, and, as a result, sweet potato production has been growing rapidly over the last decade in the United States. However, the industry is facing major challenges, including the risk of disease outbreaks and adverse weather events, which could potentially have a significant impact on the market. However, the economic literature on the sweet potato commodity is limited. This study models the U.S. sweet potato market price response to supply changes and derives elasticity estimates. This information is essential for understanding the sweet potato market and for simulating the impacts of potential supply shocks, given the challenges that the industry is facing. We found that prices are highly sensitive to supply. North Carolina, the largest sweet potato producer in the country, dominates the domestic market and exerts significantly larger influences on market prices than other producing states.

Dynamics and causality of oil price shocks on commodities: Quantile-on-quantile and causality-in-quantiles methods

We aimed to use rolling quantile regression, quantile-on-quantile, and causality-in-quantiles methods to document the dynamics and causal relationships between oil price shocks and commodities using a dataset from January 1992 to June 2019. The empirical results indicated that the coefficients of the rolling window quantile regression varied over time periods and were most significant for oil supply shock effects on commodities. Furthermore, the causality results showed that oil shocks can provide some predictability for commodities in some quantiles. The quantile-on-quantile analysis revealed that the effects of oil shocks on commodities varied across quantiles and were heterogeneous and asymmetrical. The impact of supply shock on commodities was mainly negative, whereas for aggregate demand shock, the effects were positive in bearish markets. For oil-specific demand shock, a symmetric dependence structure was detected.

The Effect of Collateral Shocks in the Context of Labor Market Frictions

The recent financial crisis was associated with a large and prolonged deterioration to the collateral value and to the collateral-based credit supply. I calibrate a model to explore the impact of collateral shocks on real firm behavior. I discover that: (i) a negative shock to the collateral value depresses the business activities by tightening the borrowing capacity. Such adverse impact is alleviated (worsened) by a lower (higher) productivity-driven credit demand; (ii) following a negative collateral shock, the reduction of labor adjustment costs causes the firms to decrease their activities to a less extent, and such positive effects of labor adjustment flexibility are more pronounced for firms facing a high level of productivity (demand). Empirically, I find that a lower labor unionization rate can mitigate the negative impact of supply shocks on the high-demand firms during the crisis.

The impact of supply shocks on unemployment in Spain

In this paper we aim to investigate how the relationships of falls and rises in the oil price with the unemployment rate and the equilibrium unemployment rate differ in the case of Spain. It is found that while oil price movements do not have an effect on unemployment, they do have a differential effect on the equilibrium rate of unemployment for our target country.

Role of Demand and Supply Shocks in Driving Inflation: Case Study of Pakistan

Generally, inflation refers to a reduction in purchasing power per unit of money and is considered a consequence of negative trends in monetary activity. As a number of factors may lead to inflation in an economy, this study attempts to measure the relative significance of structural shocks in explaining infiation. Monthly time series data is used on key macroeconomic variables of Pakistan from July 1992 to June 2011, and structural vector auto-regressions (SVAR) to understand the role ofsupply and demand shocks as key drivers of infiation. Long- run restrictions according to standard aggregate demand and aggregate supply framework are employed to identify structural shocks in the system. The results indicate that inflation follows a sluggish time path in response to supply shock as compared to demand shock of nominal nature. Specifically, around 75 percent oflong-run impact ofsupply shock on inflation is realized over a period of one year horizon as compared with 90 percent for demand shock. In terms of relative significance, supply side disturbances explain 48 percent of variation in inflation over the estimation period. Within demand side, nominal shocks are relatively more important than the real demand shock. The share ofreal demand shock was around 10 percent, while the reaming 42 percent was attributed to nominal shock. These results suggest that in addition to monetary factors, supply side disturbances should be taken into account for better understanding of and 'handle' on infiation in Pakistan.

Rising food inflation and India's monetary policy

PurposeThe purpose of this paper is to analyse the implications of sharply rising food prices for monetary policy in India and similar emerging economies at present.Design/methodology/approachThis paper uses analytical arguments from relevant macroeconomic literature and evidence from late 1960s US data to examine whether the 1970s stagflation was due to the OPEC price hike. It develops a two person (rich and poor), two commodity (food and non‐food) model to examine the impact of rising food prices on GDP, on measures of inflation, and on welfare, in the model.FindingsPreviously neglected evidence indicates that stagflation (simultaneously rising unemployment and inflation) preceded the OPEC price hike. The model results indicate that when food prices rise, the GDP deflator falls relative to the consumer price index (CPI).Research limitations/implicationsThe impact of supply shocks should be investigated by carefully examining links between abnormal rainfall and weather and output and prices on commodity by commodity basis. Further, technical issues pertaining to construction of a composite CPI representative of the population need to be explored.Practical implicationsMonetary policy in India (and similar emerging economies) should focus upon a population weighted CPI or some variant thereof.Social implicationsHigh GDP growth should not lead to complacency, since when food prices are rising, the overall welfare impact may be negative.Originality/valueThe model presented in this paper explains the sustained divergence in India, in recent years, between the CPI versus the GDP deflator measures of inflation. It also highlights a possible similar divergence between GDP and overall welfare.

The impact of supply shocks on exchange rates and interest rates: Does the Marshall-Lerner condition matter?

We examine the dynamic response of the exchange rate, the terms of trade and interest rates to supply shocks in a rational expectation (stochastic) environment. We establish the proposition that the Marshall-Lerner elasticity condition is sufficient to guarantee that an exogenous increase in real economic growth will appreciate the exchange rate, regardless of assumptions concerning market clearing and price flexibility. In specialized cases the traditional Marshall-Lerner condition is sufficient to establish propositions concerning exchange rate overshooting, the direction and magnitude of financial asset price movements and relative volatilities under flexible versus anticipatory pricing regimes.