The curious relationship between agricultural and energy price index: A Vector Error Correction Model (VECM) analysis approach

Abstract

The primary purpose of this study is to examine the relationship between monthly energy and agriculture price indices. The research uses the Vector Error Correction Model (VECM) methods, taking into account the cointegrating relationship among the series monthly observation from October 1973 to October 2018. Contrary to the indings of earlier studies the empirical result of this research indicates that the oil price index responds to the equilibrium between agriculture and oil, and that is the agricultural price index affects the energy price index and not the other way around. Furthermore, this study presented a window of opportunity to examine the curious relationship between energy and agriculture prices closely.