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Time-frequency contained co-movement of crude oil and world food prices: A wavelet-based analysis

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  • Pal, Debdatta
  • Mitra, Subrata K.

Abstract

This paper evaluates the association between crude oil prices and world food price indices, first within general space and time, and then within the combined time-frequency sphere. Monthly price data spanning from January 1990 to February 2016 were used for the analysis. The Johansen cointegration test conducted within the time domain confirmed the statistically significant cointegrated relationship between crude oil prices and the price indices of food and its sub-categories, such as dairy, cereals, vegetable oil, and sugar; however, frequency information was not accounted for. To incorporate both the time and frequency features of the data, we used a wavelet method that has shown that the world food prices, along with the prices of cereals, vegetable oils, and sugar, co-move with and are led by crude oil prices, results that remain relevant from the short-run policy perspective. The outcome of Toda–Yamamoto causality confirmed the spillover of crude oil price changes to the world food price index also in the long run. The paper ends with the policy implications of these results.

Suggested Citation

  • Pal, Debdatta & Mitra, Subrata K., 2017. "Time-frequency contained co-movement of crude oil and world food prices: A wavelet-based analysis," Energy Economics, Elsevier, vol. 62(C), pages 230-239.
    • Handle: RePEc:eee:eneeco:v:62:y:2017:i:c:p:230-239
    DOI: 10.1016/j.eneco.2016.12.020
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    More about this item

    Keywords

    Co-movement; Food price; Crude oil price; Time series; Wavelet;
    All these keywords.

    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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