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Energy and Food Commodity Prices Linkage: An Examination with Mixed-Frequency Data

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  • Trujillo-Barrera, Andres
  • Pennings, Joost M.E.
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    Abstract

    Is the relationship between energy and agricultural commodities an important factor in the increasing price variability of food commodities? Findings from the literature appear to be mixed and highly influenced by the data frequency used in those analysis. A recurrent task in time series applied work is to match up data at different frequencies, while macroeconomic variables are often found at monthly or quarterly observations, financial variables are sampled daily or even at higher frequencies. In order to match up time series at different frequencies a common procedure is to aggregate the higher frequency to fit in the low frequency, this has the potential of losing valuable information, and generating misspecification. We study whether the use of mixed frequency estimations with data for the 2006-2011 period helps to improve the out of sample performance of a model that explains grain prices as a function of energy prices, macroeconomic variables such as exchange rate, interest rate, and inflation. Preliminary results suggest that an improvement is feasible, however it is tenuous beyond two months horizons.

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    Bibliographic Info

    Paper provided by Agricultural and Applied Economics Association in its series 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. with number 150465.

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    Date of creation: 2013
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    Handle: RePEc:ags:aaea13:150465

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    Keywords: Demand and Price Analysis; Food Consumption/Nutrition/Food Safety; Resource /Energy Economics and Policy;

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    1. Frank Schorfheide & Dongho Song, 2012. "Real-time forecasting with a mixed-frequency VAR," Working Papers 701, Federal Reserve Bank of Minneapolis.
    2. Geweke, John & Amisano, Gianni, 2010. "Comparing and evaluating Bayesian predictive distributions of asset returns," International Journal of Forecasting, Elsevier, vol. 26(2), pages 216-230, April.
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    7. Claudia Foroni & Massimiliano Marcellino, 2013. "A survey of econometric methods for mixed-frequency data," Economics Working Papers ECO2013/02, European University Institute.
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    13. Teresa Serra & David Zilberman & José M. Gil & Barry K. Goodwin, 2011. "Nonlinearities in the U.S. corn‐ethanol‐oil‐gasoline price system," Agricultural Economics, International Association of Agricultural Economists, vol. 42(1), pages 35-45, 01.
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    15. Reboredo, Juan C., 2012. "Do food and oil prices co-move?," Energy Policy, Elsevier, vol. 49(C), pages 456-467.
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