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Abstract:
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 to be nonstationary and to form a cointegrating relation. Spot prices tend to move toward futures prices over the long run, and error-correction models exploiting this feature produce more accurate forecasts. The analysis indicates that on the basis of statistical- and directional-accuracy measures, futures-based models yield better forecasts than historical-data-based models or judgment, especially at longer horizons.

Commodity prices, futures, cointegration, error correction, forecast

Abstract:
When an investor is unable to implement a direct hedge, a cross-hedge can be an effective alternative. This is particularly pertinent to emerging market currency investments as currencies are less likely to have exchange-traded currency derivatives. This study examines the performance of full, minimum variance and error correction model hedges during the 1997 East Asian currency crisis. While the minimum variance and error correction hedges were effective on average, the full hedge gave superior results during periods where currencies were undergoing structural change. It may be preferable to implement a full hedge when structural change is anticipated. Little support is found for the use of error correction model hedges, indicating that while cointegration may exist, and while there may be in-sample statistical support for their use, out-of-sample performance of such hedges is less than assured.

foreign exchange, hedging, cross-hedging, financial crisis

Abstract:
This paper examines the relative pricing performance of the Asay (1986) futures option pricing model on the All Ordinaries Share Price Index Futures Call Option contract over the period January 1993-September 1995. A dataset of 8092 matched tick-by-tick transactions in SPI future options is examined, and the Asay model is used to generate pricing estimates for the options. This theoretically derived data is then compared against the real price data, and pricing anomalies are observed. Pricing biases are categorised in terms of time to maturity, and examined in terms of unit error and absolute percentage error. Conclusions are drawn as to the relative efficiency of the model with regard to systematic errors.

Abstract:
This study focuses on the small-to-medium manufacturing and value-adding sector, and is the result of focused interviews with the mangers of eight Papua New Guinea based businesses. It is complemented by interviews with managers of several statutory bodies, business councils and research centers. While it covers a range of industries, there are common themes that emerge quickly: a lack of policy stability which makes long-term business planning nearly impossible; continual problems with logistics and the bureaucracy surrounding it; irregular application of tariffs and taxes, exacerbated by opportunities for corruption; and a lack of appropriately qualified staff, particularly skilled tradespeople, a problem which becomes more pressing during a mining boom. Business in Papua New Guinea is stagnant: business people have few plans for expansion, and those that do require political support to facilitate their plans for expanded land usage. This paper discussed the main issues and looks at policy solutions for binding constraints to business development.

business development, economic growth, manufacturing

Abstract:
As the strength of the Japanese economy grew during the 1980s, many studies examined the integration between currencies in the region. Several studies found evidence for a "yen bloc", a significant and strengthening relationship between the Japanese yen and other regional currencies due to trade, direct and indirect investment by Japan in the region. However, few studies compared the role of Japan with another influential regional economy, Australia. On closer investigation it appears that the Australian dollar has a similar role in the East Asian region, and the linkages between the dollar and the Asian currencies show as much support for a "koala bloc" as a "yen bloc". In fact, as the 20th Century drew to a close, the Australian dollar appears to be a regional currency of at least equal importance to the yen. With the ever-increasing economic participation of Australia in Asia, and considering the economic difficulties facing Japan, it is a trend that can be expected to continue.

foreign exchange, cointegration, financial crisis

Abstract:
This paper proposes that aid flowing to smaller (less populous) countries has a negative impact on the quality of institutions in terms of performance and policy as opposed to that flowing to larger countries, where evidence suggests that the impacts are positive. The analysis here suggests that the level of development, the size of an economy, and the level of aid receipts matter for institutional performance as quantified by measures of economic freedom. Cross-country evidence is presented that suggests the impact of aid is damaging in small vis-à-vis large countries, and that, while aid increases economic freedom as a whole, the impact of aid on economic freedom is negative for nations with a population less than 1.4 million. This is significant for small island economies in the Pacific, where increasing amounts of overseas development assistance fund governance programmes. Case studies of Fijian economic governance initiatives are used to illustrate the difficulties encountered when donors fund institutional reform programmes in Pacific states.

Pacific islands, aid, growth, economic freedom index, institutions

Abstract:
Calvo and Reinhart (2002) demonstrated that there is a pervasive 'fear of floating' to be found in emerging market currencies, and that officially announced currency regimes may diverge from actual central bank practice. The Papua New Guinea kina is officially a floating currency, but there are a number of reasons why this is unlikely to be the case in practice. This analysis uses the Calvo and Reinhart method to show that, like many other emerging market 'floating' currencies, the kina more closely resembles a managed regime.

Foreign exchange, currency behavior

Abstract:
Recent political discussions in Australia have suggested that Pacific Island nations should dollarize to the Australian dollar. This is seen as a way to stabilise the economies of the region, which have been fraught with political and economic uncertainty. Asia is overtaking Australia as a dominant trading partner with major Pacific Island economies, and standard analysis techniques indicate that dollarization to the US dollar is preferable to dollarization with the Aussie. A discussion of currency reform in the Pacific should at least consider US dollarization, as Australia's economic influence may not be as signficiant as previously assumed.

Foreign exchange, monetary relations, dollarization