Dynamics of Crude Oil Price Change and Global Food Commodity Prices

Finance & Economics Review

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Title Dynamics of Crude Oil Price Change and Global Food Commodity Prices
Creator Onour, Ibrahim
Subject Crude oil; food commodities; volatility; GARCH
Description Purpose: This study investigates the effect of crude oil price fluctuations (price change as well as volatility) on wheat, sugar, corn, and fertilizers price changes.
Methods:  The study employs Markov switching dynamic regression, Dynamic Conditional Correlation (DCC), and Generalized Autoregressive Conditional Hetrosekadicity (GARCH) on monthly data covering the period from January 1988 to April 2018.
Results: The findings of the research support evidence of two states. State 1, pertains to the low volatility of crude oil price, and state 2 belong to the case of the high volatility of crude oil prices. Our results indicated that at state 1, an increase in crude oil prices leads to a decline in food commodity prices, while in state 2, an increase in crude oil price levels causes an increase in food commodity prices. Results of Dynamic Conditional Correlation (DCC) GARCH estimates indicate the coefficients of oil price levels are significant and positively associated with the conditional volatility of the four commodity prices.
Implications: The findings of the research imply that volatility in global food commodity prices is not due to oil price volatility but due to the oil price levels attained at extreme points.
Originality: The paper investigates the impact of different volatility levels of crude oil prices on global food commodity prices.
Publisher Research & Innovation Initiative
Date 2021-04-28
Type info:eu-repo/semantics/article
Peer-reviewed Article
Format application/pdf
Identifier https://riiopenjournals.com/index.php/finance-economics-review/article/view/248
Source Finance & Economics Review; Vol 3 No 1 (2021): Finance & Economics Review; 38-50
Language eng
Relation https://riiopenjournals.com/index.php/finance-economics-review/article/view/248/108
Rights Copyright (c) 2021 ibrahim onour

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