What drives food price volatility? Evidence based on a generalized VAR approach applied to the food, financial and energy markets

Abstract

The aim of this study is to investigate sources of food prices volatility. The analysis uses daily series for volatility of corn, soybean, wheat, rice, US dollar, crude oil, and SP500 futures spanning the period January 4, 2000 to April 1, 2017. The authors employ the generalized vector autoregressive framework in rolling sample approach in order to capture the time-varying nature of volatility spillovers. The results reveal that: volatility spillovers measures change over time; most of the volatility spillovers are observed within the two groups of markets: food markets and “non-food” markets; corn market is net volatility transmitter.

Testing oil price volatility during Covid-19: Global economic impact

“…This incident triggers uncertainty in the world market and decreases total consumption. Hence, crude consumption and, consequently, crude costs are anticipated to decline, which means instability in crude prices ( Barraza and Civelli, 2020 ); ( Śmiech et al, 2019 ) (see Table 1 ).…”

COVID‐19 and food prices in sub‐Saharan Africa

“…Prior empirical results generally point to a likely positive relationship between COVID‐19 and food prices in both developed and developing economies with very few exceptions. Śmiech et al (2019) observed that food crises in 2008, and between 2011 and 2012 increased food price volatility. Ahn and Norwood (2020) assert that unemployment, rising food prices and sales downturn could be linked to the COVID‐19 pandemic in the United States.…”

Situated Information Flow between Food Commodity and Regional Equity Markets: An EEMD‐Based Transfer Entropy Analysis

“…e authors report that the strength of interaction fluctuates significantly over time but is typically positive and greater during the period 2007-2012, when commodity prices were high and financial markets were stressed. Śmiech et al [12] examine the causes of food price volatility between corn, soybean, wheat, rice, US currency, crude oil, and SP500 futures with daily series data from January 4, 2000, to April 1, 2017. e authors use the generalised vector autoregressive framework in a rolling sample method and report that volatility spillovers change over time.…”

“…From the above arguments, we propose that studies on commodities focus on a new direction that examines information flow between commodities and global equities to inform international portfolio management. e sources of volatilities among food prices [12], the effect of market crises on food prices [1,13,14], comovement, and drivers of food price connectedness [3,15] have been examined, but information flow has been left out. Specifically, information flow between food commodities and stock markets has not yet received scholarly attention.…”

“…First, we use the five essential FAO food commodity indices, which are rarely studied together in previous works. e use of the world food index and its constituents gives a broad spectrum for analysis as opposed to earlier works that focus on a few commodities or commodity classes like energy or agriculture [12,41,42].…”