AbstractRussia's invasion of Ukraine is a major shock at the heart of the breadbasket of Europe at a time when global stocks are running short. With inelastic supply and demand for such basic goods and lack of inventories to cushion the shock, the basic economics of storage arbitrage explains the commodity price spikes needed to ration the war‐related supply shortage. In this paper, I show that sound policymaking in this context could rely on the rational expectations storage model to make sense of the chaotic price fluctuations. Empirical analysis of the unfolding commodity shock using a storage model lens suggests that, 3 months after the Russian invasion, the global food market switched into a "wait‐and‐see" mode, with price movements reflecting a loss in the size of the global share of caloric production from Ukraine.
AbstractMost of the empirical work and policy analysis in commodity markets rely on the storage model with rational expectations. However, its empirical validity remains challenged. Cafiero et al. (2011) inject new life into the commodity price literature by addressing the major empirical concern, which is the model's inability to explain the observed patterns of autocorrelation in prices. This article aims to reproduce the main estimation results of the structural parameters of the storage model obtained by Cafiero et al. (2011) and then to extend the analysis with a series of robustness checks of the original findings. The successful replication exercise supports the validity of the published results. Regarding the robustness analysis, I find that the results are particularly sensitive to the efficiency of the estimator used and the spurious averaging effect resulting from the construction of annual data series. Future structural estimations of the storage model should account for both factors for more reliable estimates to be obtained.
According to the International Monetary Fund, 145 banking crises, 208 monetary crashes and 72 sovereign-debt crises have occurred between 1970 and 2010 (Lietaer, Arnsperger, Goerner, & Brunnhuber, 2012). Crises have a negative impact on employment, human and social costs and production, and ultimately taxpayers are left to pay the bill. The most recent example is the 2007-2008 sub-prime banking crisis that affected countries such as Great Britain, Germany, the Unites States and Belgium. Another concern of modern society is the growing inequality in the world. Indeed, the world's eight richest persons possess as much wealth as the poorest 50% of the world population (Elliott, 2017). This leads to social tension and insecurity in many countries. Based on several research studies, we figured out that money and the monetary system play an important role in the world economy. Therefore, we decided to make money the subject matter of our thesis. The economy will not be able to deal with another major crisis as humanity faces major challenges in the coming decades such as climate change and retiring baby boomers. In order to achieve an "after CO2-economy", massive investments will be needed fuelled by government subsidies and tax brakes. Retiring baby boomers will increase health expenses and put the pension system of many countries in great difficulty. To face these challenges, a well-functioning monetary and economic system is indispensable. The current monetary system was essential during the industrialisation transition because of its rapid and massive economic growth. However, the multiple drawbacks like short-term vision, deterioration of social connection and community, need for endless growth, inequalities of wealth concentration, pro-cyclical tendency of money creation, and flow of the current monetary system show us that it does not addréess the challenges of today's world and enlightens its limitations. According to Bernard Lietaer, the main issue of the monetary system is "the monopoly of a single type currency created by the banking system through loans attached to positive interest rates [debt]" (Lietaer, What is the problem with our current money system, 2010). It is not flexible enough and is only adapted for transactions in the classic sectors and between conventional economic agents. Complementary currencies are an alternative that could deal with some of these shortcomings as they are usually not driven by positive interest rates but tend to encourage cooperation between people. They would also allow people to complete transactions that benefit everyone while eliminating the competitive aspect. Moreover, it would make the current monetary system more stable as it would rely on several currencies which are better adapted to certain type of transactions and which will open up the monetary system to organisation outside of a small group of financial institutions who currently seels the monetary system (Lietaer, What is the problem with our current money system, 2010). It would end the monoculture and make space for a system with multiple currencies which each have a different finality. Finally, these complementary currencies would give more importance to the cooperative economy which nowadays relies mainly on the subsidies received from the competitive economy, fuelled by its scarce currency attached to positive interest rates. Another type of alternative to the current monetary system is cryptocurrencies and its blockchain technology. The blockchain technology is a disruptive technology in the financial world in the sense that people make (international) transactions without using traditional financial institutions. Nowadays, some banks can show abusive traits due to their close connection to the political world. Introducing an apolitical cryptocurrency technology could help create a neutral and free currency market (Scott, 2016). However, it is important to stress out the fact that cryptocurrencies are facing multiple shortcomings mainly related to their high volatility and speculative traits which will have to be fixed to become a viable and sustainable alternative to the current financial system. Finally, we have addressed the feasibility to combine both concepts leading to complementary currencies supported by the blockchain technology. This idea aligns with the belief of Professor Diniz who sees digitalisation as an important factor in the implementation of complementary currencies. Digital complementary currencies offer multiple advantages that can boost their expansion and growth. The main objective is to reduce the costly and cumbersome management of complementary paper currencies. Even though initiatives related to complementary cryptocurrencies are still in their early stages, they confirm the trend that complementary currencies supported by the blockchain technology are technically feasible. These could also take advantage of the blockchain technology that is nowadays mainly used for speculative behaviors like Bitcoin. However, it is important to mention that the success of complementary currencies depends on the issue they want to tackle and the community in which they will circulate. Therefore, using the blockchain technology or even digital currencies will not always be adequate. A main example of this is the Toreke project in Ghent where the introduction of a digital currency was a failure. Even though complementary currencies are still in an "early adopter" phase, the awareness around them is expanding. However, we believe that at a bigger interest from the economic agents of the actual monetary system such as commercial banks, central banks and the political world is needed in order to develop them even more. Some examples already exist with the Banco Palmas initiative were commercial banks, central bank and the government are part of the project or the involvement of the European Commission with the D-Cent project. These few examples allow us to believe that major players start to see the benefits of complementary currencies which will play a more important role in our economic and monetary system in the near future. ; Master [120] en Ingénieur de gestion, Université catholique de Louvain, 2017
According to the International Monetary Fund, 145 banking crises, 208 monetary crashes and 72 sovereign-debt crises have occurred between 1970 and 2010 (Lietaer, Arnsperger, Goerner, & Brunnhuber, 2012). Crises have a negative impact on employment, human and social costs and production, and ultimately taxpayers are left to pay the bill. The most recent example is the 2007-2008 sub-prime banking crisis that affected countries such as Great Britain, Germany, the Unites States and Belgium. Another concern of modern society is the growing inequality in the world. Indeed, the world's eight richest persons possess as much wealth as the poorest 50% of the world population (Elliott, 2017). This leads to social tension and insecurity in many countries. Based on several research studies, we figured out that money and the monetary system play an important role in the world economy. Therefore, we decided to make money the subject matter of our thesis. The economy will not be able to deal with another major crisis as humanity faces major challenges in the coming decades such as climate change and retiring baby boomers. In order to achieve an "after CO2-economy", massive investments will be needed fuelled by government subsidies and tax brakes. Retiring baby boomers will increase health expenses and put the pension system of many countries in great difficulty. To face these challenges, a well-functioning monetary and economic system is indispensable. The current monetary system was essential during the industrialisation transition because of its rapid and massive economic growth. However, the multiple drawbacks like short-term vision, deterioration of social connection and community, need for endless growth, inequalities of wealth concentration, pro-cyclical tendency of money creation, and flow of the current monetary system show us that it does not addréess the challenges of today's world and enlightens its limitations. According to Bernard Lietaer, the main issue of the monetary system is "the monopoly of a single type currency created by the banking system through loans attached to positive interest rates [debt]" (Lietaer, What is the problem with our current money system, 2010). It is not flexible enough and is only adapted for transactions in the classic sectors and between conventional economic agents. Complementary currencies are an alternative that could deal with some of these shortcomings as they are usually not driven by positive interest rates but tend to encourage cooperation between people. They would also allow people to complete transactions that benefit everyone while eliminating the competitive aspect. Moreover, it would make the current monetary system more stable as it would rely on several currencies which are better adapted to certain type of transactions and which will open up the monetary system to organisation outside of a small group of financial institutions who currently seels the monetary system (Lietaer, What is the problem with our current money system, 2010). It would end the monoculture and make space for a system with multiple currencies which each have a different finality. Finally, these complementary currencies would give more importance to the cooperative economy which nowadays relies mainly on the subsidies received from the competitive economy, fuelled by its scarce currency attached to positive interest rates. Another type of alternative to the current monetary system is cryptocurrencies and its blockchain technology. The blockchain technology is a disruptive technology in the financial world in the sense that people make (international) transactions without using traditional financial institutions. Nowadays, some banks can show abusive traits due to their close connection to the political world. Introducing an apolitical cryptocurrency technology could help create a neutral and free currency market (Scott, 2016). However, it is important to stress out the fact that cryptocurrencies are facing multiple shortcomings mainly related to their high volatility and speculative traits which will have to be fixed to become a viable and sustainable alternative to the current financial system. Finally, we have addressed the feasibility to combine both concepts leading to complementary currencies supported by the blockchain technology. This idea aligns with the belief of Professor Diniz who sees digitalisation as an important factor in the implementation of complementary currencies. Digital complementary currencies offer multiple advantages that can boost their expansion and growth. The main objective is to reduce the costly and cumbersome management of complementary paper currencies. Even though initiatives related to complementary cryptocurrencies are still in their early stages, they confirm the trend that complementary currencies supported by the blockchain technology are technically feasible. These could also take advantage of the blockchain technology that is nowadays mainly used for speculative behaviors like Bitcoin. However, it is important to mention that the success of complementary currencies depends on the issue they want to tackle and the community in which they will circulate. Therefore, using the blockchain technology or even digital currencies will not always be adequate. A main example of this is the Toreke project in Ghent where the introduction of a digital currency was a failure. Even though complementary currencies are still in an "early adopter" phase, the awareness around them is expanding. However, we believe that at a bigger interest from the economic agents of the actual monetary system such as commercial banks, central banks and the political world is needed in order to develop them even more. Some examples already exist with the Banco Palmas initiative were commercial banks, central bank and the government are part of the project or the involvement of the European Commission with the D-Cent project. These few examples allow us to believe that major players start to see the benefits of complementary currencies which will play a more important role in our economic and monetary system in the near future. ; Master [120] en Ingénieur de gestion, Université catholique de Louvain, 2017
