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On the Nonlinear Impact of Oil Price Shocks on the World Food Prices Under Different Markets Conditions

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  • Manel Youssef
  • Khaled Mokni

Abstract

This paper investigates the impact of oil price shocks on the world food prices. We use the structural VAR model to disentangle oil price shocks into supply, aggregate demand, and oil-specific demand-driven shocks. Moreover, we employ a new approach based on the Markov regime-switching quantile regression (MRS-QR) model to investigate the response of food prices to different oil price shocks. Based on monthly data from 1992 to 2018, results show that the reaction of food prices to different structural oil shocks depends on the oil price regimes and varies in significance, sign, and size throughout the food market conditions. Besides, the increases in regression coefficients and smoothed probability during food and oil crisis periods confirm the existence of contagion effects between oil and food markets. Moreover, we find that the supply and aggregate demand shocks do not show a strong contribution to the presence of this phenomenon. Conversely, oil-specific demand shocks represent the main factor that contributes to contagion between oil and food markets.

Suggested Citation

  • Manel Youssef & Khaled Mokni, 2021. "On the Nonlinear Impact of Oil Price Shocks on the World Food Prices Under Different Markets Conditions," International Economic Journal, Taylor & Francis Journals, vol. 35(1), pages 73-95, January.
    • Handle: RePEc:taf:intecj:v:35:y:2021:i:1:p:73-95
    DOI: 10.1080/10168737.2020.1870524
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    Cited by:

    1. Kocak, Emrah & Bilgili, Faik & Bulut, Umit & Kuskaya, Sevda, 2022. "Is ethanol production responsible for the increase in corn prices?," Renewable Energy, Elsevier, vol. 199(C), pages 689-696.
    2. Shahzad, Farrukh & Bouri, Elie & Mokni, Khaled & Ajmi, Ahdi Noomen, 2021. "Energy, agriculture, and precious metals: Evidence from time-varying Granger causal relationships for both return and volatility," Resources Policy, Elsevier, vol. 74(C).
    3. Liya Hau & Huiming Zhu & Muhammad Shahbaz & Ke Huang, 2023. "Quantile Dependence between Crude Oil and China’s Biofuel Feedstock Commodity Market," Sustainability, MDPI, vol. 15(11), pages 1-17, June.

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