Volatility Transmission Among Oil Price, Exchange Rate and Agricultural Commodities Prices

Abstract

The aim of this article is to examine the interdependence relationship among the volatilities of crude oil price, U.S. dollar exchange rate, and a set of agricultural commodities prices. An autoregressive (AR) with an exponential generalized autoregressive conditional heteroscedasticity (EGARCH) model or AR-EGARCH process and vector error correction model (VECM) approach was used on monthly data spanning from Jan 1986 to Dec 2005 as the pre-crisis period and from Jan 2006 to Nov 2015 as the post-crisis period. The results show that volatility in the agricultural commodity returns for most cases are affected by the volatility of the crude oil returns in the post-crisis period. Also, the volatility of the U.S. dollar exchange rate highly affects the agricultural commodities returns in the pre-crisis than the post-crisis periods. Furthermore, crude oil returns volatility does affect the U.S. dollar exchange rate volatility in the post-crisis period, which in turn affects the volatility of the agricultural commodities returns through changes in prices. The results of impulse response function (IRFs) are significant for most agricultural commodities volatility in the post-crisis period than the pre-crisis period.

Agriculture and Non-Agriculture Growth, Inflation and Income Inequality in Developed and Developing Countries

“…11, No. 11;2019 filtered inflation rate and also a non-significant positive relationship between income inequality and the HP filtered squared for the developing countries. The coefficient of inflation gap or the cyclical component of inflation rate is negative, but it is not significant.…”

“…11, No. 11;2019 cointegration analysis and found that income inequality has a positive long-run relationship with economic growth, and inflation. The results confirmed the existence of Kuznets hypothesis in Pakistan.…”

“…11, No. 11;2019 relationship between per capita income and income inequality can be presented by a 'bell-shaped' curve or inverted 'U-shaped' known as the Kuznets hypothesis (Kuznets, 1955;1963), which is in harmony with the Lewis dual economy model (Lewis, 1954).…”

Commodity price volatility and U.S. monetary policy: Commodity price overshooting revisited

“…Using a Structural Vector Autoregressive (SVAR) models, Siami‐Namini and Hudson () found that a U.S. monetary contraction has a negative significant effect on the aggregate commodity price index and commodity subindices included the food price index, agricultural raw materials price index, maize (corn) price, and crude oil price, and results reinforce the overshooting hypothesis. Also, in another study, Simai‐Namini and Hudson () found that the volatility of the U.S. dollar exchange rate is transmitted to international agricultural commodity prices.…”

Oil Price Volatility Spillover Effects on Food Prices in Nigeria

“…Joining this argument, Wang et al [53] explain that oil shocks have minimal effect on agricultural commodity prices in pre-crisis periods, while it is higher in post-crisis period. Corroborating this argument, Siami-Namini and Hudson [56] argue that prices of food do not significantly react to oil price volatility spillover in pre-crisis period but do in and post-crisis period. Hence, our study employs monthly data spanning from January 2000 to December 2016 dividing the periods into pre-crisis (from January, 2000 to April, 2006) and post-crisis (from May, 2006 to December, 2016).…”