Filip Tarlea, 07 April 2018

Preferential trade agreements don’t happen overnight – they require lengthy negotiations. This column examines the effect the process of negotiating an agreement has on trade between the negotiating parties. The results suggest that during prolonged negotiations, the expectation of the agreement, or uncertainty before the signing of the agreement, undermine bilateral trade growth.

Samya Beidas-Strom, Andrea Pescatori, 20 December 2014

The recent dramatic fall in oil prices has renewed the interest in the importance of shocks in the oil price volatility. This column presents results from new research on the role of shocks and speculation on oil prices. The authors find that when speculation is short in duration, it has the weakest impact on oil prices and demand shocks have the largest. However, when speculation is allowed to have short- and long-term effects, it is the main contributor to the volatility of oil prices.

Lutz Kilian, 21 April 2012

Was the surge in the oil prices between 2003 and 2008 caused by financial investors taking speculative positions in oil futures markets? Many pundits and policymakers seem to think so, but this column says this view goes against the extensive body of evidence.

Lukas Menkhoff, Lucio Sarno, Maik Schmeling, Andreas Schrimpf, 31 March 2012

Momentum trading – buying past winners and selling past losers – is a popular trading strategy in many assets. In foreign exchange high returns to momentum trading have fuelled concerns that it is little more than destabilising speculation. This column argues that, for better or worse, such strategies are likely to continue.

Lutz Kilian, Bassam Fattouh, Lavan Mahadeva, 26 March 2012

What caused the price of oil to surge in 2003–08? CEPR DP8916 assesses – and finds little evidence for – the popular view that ‘speculation’ drives oil price shocks. Economic fundamentals, the authors argue, are still the main determinants.

Lukas Menkhoff, Lucio Sarno, Maik Schmeling, Andreas Schrimpf, 23 March 2011

The carry trade – borrowing in currencies with low interest rates and investing in currencies with high interest rates – has been a surprising hit for decades. This column provides empirical evidence suggesting that the mysteriously high returns this generates can actually be explained as compensation for the volatility risk undertaken.

Pasquale Della Corte, Lucio Sarno, Ilias Tsiakas, 26 January 2011

The carry trade in foreign currency has attracted considerable attention from academics and practitioners. This column presents evidence of a new carry trade strategy – this time speculating on the volatility of foreign exchange. This is done by buying or selling forward volatility agreements. It suggests that investors following the new carry trade can do extremely well – regardless of whether the value of these currencies go up or down.

Stefan Tangermann, 22 July 2008

New research shows that India, China, and speculators are not the culprits in the food price explosion. Biofuels were a significant element in the 2005-2007 food price surge as they accounted for 60% of the growth in global consumption of cereals and vegetable oils. There cannot be any doubt that biofuels were a significant element in the rise of food prices. Since new research also shows that biofuel support policies are disappointingly ineffective on environmental grounds, governments should reconsider them.

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