Akshaya Jha, Frank Wolak, 14 August 2019

Futures trading should make spot markets more efficient. The column uses the introduction of purely financial traders in the California energy market to show that their presence reduced average price differences between day-ahead and real-time markets. The introduction of financial trading in high-demand hours saved $23 million in fuel costs and reduced emissions and pollution.

Jussi Keppo, Josef Korte, 07 September 2014

Four years ago, the Volcker Rule was codified as part of the Dodd–Frank Act in an attempt to separate allegedly risky trading activities from commercial banking. This column presents new evidence finding that those banks most affected by the Volcker Rule have indeed reduced their trading books much more than others. However, there are no corresponding effects on risk-taking – if anything, affected banks take more risks and use their trading accounts less for hedging.

Dario Fauceglia, Anirudh Shingal, Martin Wermelinger, 19 October 2012

Recent literature on the role of imported inputs in exchange-rate adjustments of exports implicitly assumes full exchange-rate pass-through into imported input prices, which is a rather strong assumption. This column uses intermediate input prices to investigate the effect of exchange-rate fluctuations in Switzerland. It suggests an appreciation of the currency leads to higher profit margins through the import channel and imported inputs act as a natural means for hedging exchange-rate risks.

Eduardo Borensztein, Olivier Jeanne, Damiano Sandri, 15 December 2009

Accumulating large foreign exchange reserves is a costly insurance strategy for developing countries. This column says that commodity-exporting countries might do better by hedging their risk with financial instruments, thereby reducing the need to hold precautionary reserves. Yet few do so.

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