Do oil prices drive agricultural commodity prices? Further evidence in a global bio-energy context

Su, Chi‐Wei; Wang, Xiao-Qing; Tao, Ran; Lobonţ, Oana-Ramona

doi:10.1016/j.energy.2019.02.028

Cited by 124 publications

(35 citation statements)

References 46 publications

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“…The partition of the dataset was motivated by the implementation of the Energy Policy Act of 2005. Previous studies pointed out that agricultural and energy markets are more likely to interact with each other after the event (Su et al 2019;Avalos 2014;Wang et al 2014;. Moreover, the shocks of the food crisis and the global financial crisis, which can trigger changes in the joint dynamics between the two markets, also happened during this period.…”

Section: Data and Testsmentioning

confidence: 94%

“…In this paper, we used the SVAR model to estimate the relationship between agricultural markets and the crude oil market. It has been pointed out that agricultural commodity prices are endogenous to oil price, and vice versa (Zhang et al 2010;Natanelov et al 2011;Vacha et al 2013;Avalos 2014;Su et al 2019). Therefore, standard regression models cannot capture the bidirectional relationship between the two commodities.…”

Section: Methodsologymentioning

confidence: 99%

“…In general, the direct biofuel channel has an ambiguous effect on crude oil price. Su et al (2019) showed that the bidirectional relationships between crude oil price and agricultural commodity prices are more likely to be found in the sub-sample periods using the sub-sample rolling estimation. Furthermore, the study also pointed out that agricultural commodities that are not feedstocks of biofuel production can also have bidirectional relationships with oil price.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Despite its scarcity, the empirical literature has recognized the causality from food prices to energy prices (Su et al 2019;Vacha et al 2013;Avalos 2014;Natanelov et al 2011;Zhang et al 2010). However, these studies often employed only the price data without including further information about the agricultural supply and demand.…”

Section: Introductionmentioning

confidence: 99%

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Modeling the Impact of Agricultural Shocks on Oil Price in the US: A New Approach

Hồ

et al. 2019

JRFM

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The current literature has generally considered prices of the agricultural commodity as an endogenous factor to crude oil price. As such, the role of the agricultural market in the energy sector has been largely ignored. We argue that the expansion of agricultural production may trigger a significant increase in oil price. In addition, the world has recently witnessed a growth in biofuel production, leading to an increase in the size of the agricultural sector. This study is conducted to examine the impact of different agricultural shocks on the oil and agricultural markets in the US for the period from 1986 to 2018. The study utilizes the Structural Vector Autoregressive (SVAR) model to estimate the relationship between the agricultural market and the crude oil market. Moreover, the variance decomposition is also used to quantify the contribution of agricultural demand shocks on oil price variations. Findings from this paper indicate that different agricultural shocks can have different effects on oil price and that corn use in ethanol plays an important role in the impact of corn demand shocks on oil price. We find evidence that the agricultural market can have an impact on oil prices through two main channels: indirect cost push effect and direct biofuel effect. Of these, the biofuel channel unexpectedly suggests that the expansion of bioethanol may in fact foster the dependency of the economy on fossil fuel use and prices.

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Section: Data and Testsmentioning

confidence: 94%

Section: Methodsologymentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Modeling the Impact of Agricultural Shocks on Oil Price in the US: A New Approach

Hồ

et al. 2019

JRFM

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“…Compared to the traditional Granger causality test (GC), the Quantile Granger causality test (QGC) provides advanced insights to delineate the causality. The disadvantage of GC is that, without carrying over to other distribution characteristics, the empirical results are unreliable due to the sensitivity to data sets and variable selection [78,79]. The properties rely very much on the assumption of normal distribution, which makes the conclusions of the test more questionable [80].…”

Section: Quantile Granger Causality Testmentioning

confidence: 99%

Can Stock Investor Sentiment Be Contagious in China?

Cai

Ran

2020

Sustainability

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This paper explores the impact of investor sentiment on financial markets in China by taking the quantile causality test. We find that government bond markets, gold markets, and foreign exchange markets are affected by stock investor sentiment, except for in the corporate bond market. In extreme situations, such as excessively optimistic or pessimistic sentiment, these markets will become more vulnerable to suffering from drastic fluctuations. On the contrary, the market return in government bonds, corporate bonds, and foreign exchange also has an influence on stock investor sentiment. Moreover, these links show various asymmetry due to the heterogeneity of different financial markets. Our results are consistent with the noise trader model, which shows the impact of investor sentiment on market returns. Hence, the authorities can sustain the stabilization of financial markets by reducing information asymmetry, guiding the rational sentiment of investors, and increasing effective regulations.Especially in certain extreme pessimistic situations, sentiment in the stock market can lead to drastic fluctuations in other financial markets [15,16], and the authorities cannot maintain market stability and continuity of development. In turn, the performance of these markets is also a remarkable barometer that leads stock investor sentiment to change [17]. Through information in different market environments, external shocks, not only make asset price fluctuate, but also result in stock investors overreacting, and this affects their investment expectations [18]. This bidirectional transmission is regarded as an important factor for the linkage among major financial markets [19]. Hence, investor sentiment plays an important role in the formation of financial market effectiveness. If investor sentiment cannot be reasonably guided, it will be difficult to suppress irrational trading and speculative bubbles and improve market efficiency.Compared with stock markets in developed countries, individual investors account for a large proportion of Chinese stock investors, which makes the whole market more emotional [20]. With a lack of social responsibility and an awareness of sustaining market efficiency, the individual Chinese investor has an underdeveloped investment education and, thus, they often show irrational investment behavior [21]. Hence, market fluctuation frequently happens, and it is difficult for investor sentiment to be properly guided. Not only do investors make irrational trades in the stock market, but they are also more likely to carry their emotions to other markets [22]. If investor sentiment in the stock market spreads to other markets and causes unexpected fluctuations in China, the pricing and operating efficiency of many financial markets will be damaged. As well as the stock market, the gold, bond, and foreign exchange markets are all financial markets with a large scale in China. If such emotional contagion exists in China, investors who excessively ignore the fundamentals will find it difficult to form th...

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The Impact of News Sentiment Indicators on Agricultural Product Prices

Hsu

2021

Comput Econ

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Do oil prices drive agricultural commodity prices? Further evidence in a global bio-energy context

Cited by 124 publications

References 46 publications

Modeling the Impact of Agricultural Shocks on Oil Price in the US: A New Approach

Modeling the Impact of Agricultural Shocks on Oil Price in the US: A New Approach

Can Stock Investor Sentiment Be Contagious in China?

The Impact of News Sentiment Indicators on Agricultural Product Prices

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