Multivariate GARCH to Measure Volatility Transmission Between Oil and Food Markets
Main Article Content
Abstract
The movements in the global food prices have been of large interest to the different states
because of the challenging effects on their macroeconomic indicators. The causes beyond the large
swings in the global food market are several in which we find globalization and market
interrelationship as one of the most important causes of the recent uprising volatility in this market.
This paper highlights the latter issue and analyzes the role of the volatility existing in the
international oil market in driving the global food prices fluctuations. To do so, a bivariate GARCH
model is used to show the volatility spillover between oil and food markets. A diagonal BEKK
specification shows evidence of a link between volatilities in the returns of oil prices and weighted
index of a set of important food commodities prices.
Article Details
References
Abbott, P., Hurt, C., and Tyner, W. (2008). What's Driving Food Prices? Farm Foundation
Issue Report. Illinois, USA: Farm Foundation, pp.23-34.
Abdel Hameed, A. A., and Arshad, F. M. (2008). The Impact of Petroleum Prices on
Vegetable Oils Prices: Evidence from Co-integration Tests. Paper presented at the
International Borneo Business Conference on Global Changes, Malaysia, 15-17
December, 2008.
Agung I.G.N. (2009) “Time series data analysis using Eviews”, Statistics in Practice, Wiley
and Sons edition.
Arshad, F. M., and Abdel Hameed, A. A. (2009). The Long Run Relationship Between
Petroleum and Cereal Prices, Global Economy and Finance Journal, Vol.2, No.2, pp.
-100.
Aynur Pala, Structural Breaks, Cointegration, and Causality by VECM Analysis of Crude
Oil and Food Price, International Journal of Energy Economics and Policy, Vol. 3, No.
, 2013.
Balcombe K, (2012), “The nature and determinants of volatility in agricultural prices: an
empirical study”, Chapter 5 of the book: “Safeguarding food security in volatile global
markets”, edited by Prakash, FAO.
BarellaCenter for food and nutrition, (October 2011), “Food prices and market volatility:
the variables involved”.
Baumeister and Kilian (2013), “Do oil price increases cause higher food prices?”, Preliminary
version of a paper prepared for the 59th Panel Meeting of Economic Policy, October 2013.
Bollerslev, Tim. A Conditionally Heteroskedastic Time Series Model for Speculative Prices
and Rates of Return, The Review of Economics and Statistics, Vol. 69, No. 3 (Aug.,
, pp. 542-547.
Campiche, J., Bryant, H., Richardson, J., and Outlaw, J. (2007). Examining the Evolving
Correspondence between Petroleum Prices and Agricultural Commodity Prices. Paper