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The dynamic linkages between food prices and oil prices. Does asymmetry matter?

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  • Karakotsios, Achillefs
  • Katrakilidis, Constantinos
  • Kroupis, Nikolaos

Abstract

Crude oil prices are thought to be causally related to global food prices. The present paper examines the short and long-run dynamic linkages between crude oil prices and world food prices, using monthly data for the period January 2000–December 2015. The relationship between the two series is investigated in both the linear and asymmetric framework accounting for the presence of structural breaks as well as for possible asymmetries. In the linear framework, the findings support a unidirectional causal relationship running from oil to food prices. However, in the asymmetric framework, there is evidence of long-run feedback effects. This study extends the literature on the global relationship between food and oil prices, accounting for possible asymmetric causal effects. The obtained evidence could be valuable to policy designation for both the food and energy industry.

Suggested Citation

  • Karakotsios, Achillefs & Katrakilidis, Constantinos & Kroupis, Nikolaos, 2021. "The dynamic linkages between food prices and oil prices. Does asymmetry matter?," The Journal of Economic Asymmetries, Elsevier, vol. 23(C).
    • Handle: RePEc:eee:joecas:v:23:y:2021:i:c:s1703494921000086
    DOI: 10.1016/j.jeca.2021.e00203
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    More about this item

    Keywords

    Crude oil prices; Food prices; Cointegration; Structural breaks; Asymmetric ARDL;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy

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