Many developing economies are heavily exposed to commodity markets, leaving them vulnerable to the vagaries of international commodity prices. This paper examines the use of commodity options-including plain vanilla, risk reversal, and barrier options-to hedge such risk. It then proposes the use...

This paper examines the factors affecting the weekly peso/dollar exchange rate movements between 1999 and 2013 using an error correction model. The model fits the historical data well. While copper price is the most important determinant of the peso exchange rate over the long run, other factors...

The experience of developing countries over 1990-2010 indicates that commodity prices have a significant impact on fiscal outcomes. Both revenue and expenditure rise in response to commodity (import or export) price increases; the response of the fiscal deficit is ambiguous. A floating exchange...

U.S. monetary policy can remain extraordinarily accommodative only if longer-term inflation expectations stay well-anchored, including in response to commodity price shocks. We find that oil price shocks have a statistically significant, but economically small impact on longer-term inflation...

This paper assesses the performance of three types of commodity price forecasts—those based on judgment, those relying exclusively on historical price data, and those incorporating prices implied by commodity futures. For most of the 15 commodities in the sample, spot and futures prices appear...

This paper undertakes an investigation into the efficiency of the crude oil futures market and the forecasting accuracy of futures prices. Efficiency of the market is analysed in terms of the expected excess returns to speculation in the futures market. Accuracy of futures prices is compared...

This paper uses a dynamic optimization model to estimate the welfare gains of hedging against commodity price risk for commodity-exporting countries. The introduction of hedging instruments such as futures and options enhances domestic welfare through two channels. First, by reducing export...