The linkage between oil and agricultural commodity prices in the light of the perceived global risk

Abstract

Th e paper examines a systematic interrelationship between the world oil and agricultural commodity prices, taking the role of the USD and the perceived global market risks into consideration for the period from January 1990 to June 2013. Th e authors initially determine the signifi cant cross-sectional dependence in a large balanced panel framework for 27 commodity prices, and then apply the second generation panel unit root (PUR) tests. Findings from the PUR tests clearly suggest that there is a strong unit root in agricultural commodity prices. In addition, the empirical fi ndings from the fi xed eff ects panel data, panel co-integration analysis, the Panel-Wald Causality tests, and the common correlated eff ects mean group estimations strongly show that the world oil price and the weak USD have positive impacts on almost all agricultural commodity prices. Th ere are also retained the adjuvant eff ects of the escalatory perceived global market risk upon most agricultural commodity prices.Key words: oil prices, panel data estimations, the VIX 1 The causality of prices affecting economic conditions -one must keep in mind that the cause and effect is never in one direction and mainly depends on a specific context.

Price volatility spillovers among agricultural commodity and crude oil markets: Evidence from the range-based estimator

“…Answering this question has been a growing issue in the recent literature, and indeed, there is an abundant evidence elucidating the transmission mechanism among the prices of energy and the agricultural commodity markets (Pokrivcak and Rajcaniova, 2011;Gozgor and Kablamaci 2014).…”

“…1 For instance, Gozgor and Kablamaci (2014) recently investigated the relationship between crude oil and 29 agricultural commodity prices. Taking role of the US Dollar and the perceived global market risks into consideration, they find that the oil price has unidirectional and positive impacts on almost all agricultural commodity prices.…”

Commodity markets volatility transmission: Roles of risk perceptions and uncertainty in financial markets

“…For instance, Gozgor and Kablamaci (2014) Their results also highlight the role of speculation and financialization in the price transmission mechanism from the crude oil to agricultural commodity markets. In addition, Kristoufek (2014) finds that the long-memory effect is important for the crude oil price volatility.…”

“…For example, some external factors, such as the global demand that is related to the rapid economic growth of emerging market economies (Sockin and Xiong, 2013), the real value of the USD exchange rate (Gozgor and Kablamaci, 2014), and the monetary policy stance in the rich-world; in other words, the world interest rate (Frankel, 2014) all can affect the price transmissions among oil and agricultural commodity markets. For example, according to Gilbert (2010), the rising economic growth, and thus the high domestic demand in emerging markets, developments in financial products related to commodity futures, and the easing monetary policy stance are among the main reasons for the stronger co-movement of oil and agricultural commodity markets.…”

The interactions between agricultural commodity and oil prices: an empirical analysis

“…Many studies report that there is a causal relationship running from the oil prices to the agricultural commodity prices (Gilbert 2010;Saghaian 2010;Nazlioglu 2011;Nazlioglu and Soytas 2012;Gozgor and Kablamaci 2014;Wang et al 2014).…”