Time-frequency causality and connectedness between oil price shocks and the world food prices

Raza, Syed Ali; Guesmi, Khaled; Bélaïd, Fateh; Shah, Nida

doi:10.1016/j.ribaf.2022.101730

Cited by 20 publications

(4 citation statements)

References 96 publications

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“…In the case of an oil plead shockwave, a sturdier association is observed among the exceptionally high and low quantiles specifically in food prices indexes. However, Raza et al (2022) prove that the link between the food prices and oil prices during January 1993 to September 2020 is bidirectional. Furthermore, the findings prove that the oil prices are the principal sponsors to instability conduction evaluated to food prices.…”

Section: Introductionmentioning

confidence: 93%

Assessing the Impact of Oil Price Volatility on Food Prices in Saudi Arabia: Insights From Nonlinear Autoregressive Distributed Lags (NARDL) Analysis

Darwez,

Alharbi,

Ifa

et al. 2023

Economics

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This research investigates the impact of oil price fluctuations on food prices in Saudi Arabia between 1979 and 2020 using Nonlinear Autoregressive Distributed Lags (NARDL) methodology. The study employs Augmented Dickey Fuller (ADF) and Phillips Perron (PP) tests to determine the integration order of the variables and Bounds testing to confirm the existence of long run cointegration relationships between each variable. The results indicate that oil shocks influence food prices through several mechanisms. Firstly, the cost of energy increases due to the rise in oil prices, affecting the agricultural commodity market, including farm equipment, food processing, packaging, and distribution costs. Secondly, the demand for agricultural commodities to produce biofuels affects food availability and thus food prices. Thirdly, as an oil-based economy, the oil price shock affects food prices through its impact on government spending, which affects aggregate demand and liquidity. Therefore, Saudi Arabia should adopt appropriate policies to mitigate the impact of oil price shocks on food prices, including investing in renewable energy sources, diversifying its economy, and improving food production and supply chain efficiency. Additionally, implementing appropriate fiscal policies to ensure sufficient budget allocation for food support programs is crucial. However, Investing in groundwater exploration can contribute significantly to the development of Saudi agriculture and to gradually achieving food self-sufficiency.

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Section: Introductionmentioning

confidence: 93%

Assessing the Impact of Oil Price Volatility on Food Prices in Saudi Arabia: Insights From Nonlinear Autoregressive Distributed Lags (NARDL) Analysis

Darwez,

Alharbi,

Ifa

et al. 2023

Economics

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“…The commodity market hypothesis can contribute to bubbles in food prices, as merchants try to find increased income from the upsurge (Li, Li and Chavas [60]; Zigmont et al [83]). Governments and global groups have responded to price bubbles in food expenditures using various measures, including subsidies and price controls [84]. One frequent coverage response is to supply food subsidies or money transfers to low-income households to assist them in buying meals throughout durations of high expenses (Kusz et al [85]).…”

Section: Discussionmentioning

confidence: 99%

Food Price Bubbles: Food Price Indices of Turkey, the FAO, the OECD, and the IMF

Özcan

2023

Sustainability

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Food price bubbles are a phenomenon in which the cost of some food items or food commodities climbs quickly and unreasonably before collapsing due to reasons such as speculation, supply and demand imbalances, meteorological occurrences, and governmental actions. Governments and academics keep an eye on food prices to spot and address these bubbles. The aim of this paper is to analyze the food price bubble phenomenon despite the global slowdown by examining its origins, consequences, and policy solutions. The study’s contribution lies in its investigation of the presence of a potential bubble formation in food prices, which have experienced a surge globally and particularly in Turkey in recent years. The research examines the behavior of bubble formation in food prices in Turkey, the FAO, the OECD, and the IMF between 1992 and 2022 using the ADF, SADF, and GSADF tests. These tests can help identify when asset prices deviate significantly from their fundamental values and may be at risk of a sharp correction. The TUR, FAO, OECD, and IMF variables all show distinct bubble formations, with the TUR variable having 130 periods from 1995 to 2006, the FAO having 8 price bubble occurrences, the OECD having 12 different bubble formations, and the IMF having 4 distinct bubble formations. The results indicate the existence of food price bubbles that demonstrate disparities from their inherent values grounded in market fundamentals.

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“…The authors confirmed the role of oil prices in explaining international food price fluctuations. These results have been approved by Raza et al (2022), who suggested that oil prices (both supply and demand shocks) are the key drivers of food price volatility, including meat, dairy, cereals, and sugar. For their part, Tadesse et al (2013) analysed the main determinants of international food price volatility and concluded that external shocks substantially affected volatility.…”

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confidence: 86%

What factors contribute to the volatility of food prices? New global evidence

Zmami¹,

Ben-Salha²

2023

Agric. Econ. - Czech

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The adverse economic and social effects of the recent increases in food prices have prompted policymakers and academics to reconsider the potential causes of such increases. This paper contributes to the existing literature by investigating the causal effects of oil prices, fertiliser prices, global economic activity, and geopolitical risk on international food price volatility between January 1993 and December 2021. The research considers the aggregate food price index and the prices of various specific foods, including cereal, vegetable oils, dairy, meat, and sugar. The Glosten, Jagannathan, and Runkle-generalised autoregressive conditional heteroskedasticity (1,1) [GJR-GARCH(1,1)] model is employed to estimate the food price volatility series, while the causality-in-quantiles test is conducted to identify the drivers of food price volatility for different volatility regimes. The analysis suggests heterogeneous results regarding the significance of causal linkages. More specifically, the aggregate food price volatility is affected by oil prices, global economic activity, and geopolitical risk under different market conditions. The causality analysis also indicates that the volatility of cereal prices is the most sensitive to the four considered variables. Likewise, geopolitical risk is the most critical factor affecting all food commodities during almost all market conditions, while oil prices and global economic activity have limited predictive power. Finally, there is strong evidence that most causal linkages are confirmed during normal market conditions. Policy recommendations are subsequently derived.

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Time-frequency causality and connectedness between oil price shocks and the world food prices

Cited by 20 publications

References 96 publications

Assessing the Impact of Oil Price Volatility on Food Prices in Saudi Arabia: Insights From Nonlinear Autoregressive Distributed Lags (NARDL) Analysis

Assessing the Impact of Oil Price Volatility on Food Prices in Saudi Arabia: Insights From Nonlinear Autoregressive Distributed Lags (NARDL) Analysis

Food Price Bubbles: Food Price Indices of Turkey, the FAO, the OECD, and the IMF

What factors contribute to the volatility of food prices? New global evidence

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