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How far do shocks move across borders?Examining volatility transmission in major agricultural futures markets

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  • Manuel Hernandez
  • Raul Ibarra
  • Danilo Trupkin

    ()

Abstract

This paper examines the level of interdependence and volatility transmission in global agricultural futures markets. We follow a multivariate GARCH approach to explore the dynamics and cross-dynamics of volatility across major exchanges of corn, wheat, and soybeans between the United States, Europe, and Asia. We account for the potential bias that may arise when considering exchanges with dierent closing times. The period of analysis is 2004-2009 for corn and soybeans, and 2005-2009 for wheat. The results indicate that agricultural markets are highly interrelated and there are both own- and cross-volatility spillovers and dependence among most of the exchanges. There is higher interaction between the United States (Chicago) and both Europe and Asia than within the latter. The results further show the major role Chicago plays in terms of spillover eects over the other markets, particularly for corn and wheat. Additionally, the level of interdependence between exchanges has only increased in recent years for some of the commodities. Implications for potential regulatory policies of agricultural futures markets are also briey discussed.

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Bibliographic Info

Paper provided by Facultad de Ciencias Empresariales y Economia. Universidad de Montevideo. in its series Documentos de Trabajo/Working Papers with number 1109.

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Date of creation: 2011
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Handle: RePEc:mnt:wpaper:1109

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Postal: Prudencio de Pena 2440, Montevideo 11600
Web page: http://www.um.edu.uy/cee/
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Keywords: Volatility transmission; agricultural commodities; futures markets; Multivariate GARCH.;

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Citations

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Cited by:
  1. Hernandez, Manuel A. & Ibarra, Raul & Trupkin, Danilo R., 2011. "How far do shocks move across borders?: Examining volatility transmission in major agricultural futures markets," IFPRI discussion papers 1109, International Food Policy Research Institute (IFPRI).
  2. Gardebroek, Cornelis & Hernandez, Manuel A. & Robles, Miguel, 2013. "Market interdependence and volatility transmission among major crops," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150119, Agricultural and Applied Economics Association.
  3. de Brauw, Alan & Gilligan, Daniel, 2011. "Using the regression discontinuity design with implicit partitions: The impacts of comunidades solidarias rurales on schooling in El Salvador," IFPRI discussion papers 1116, International Food Policy Research Institute (IFPRI).
  4. Yamauchi, Futoshi & Liu, Yanyan, 2011. "Impacts of an early education intervention on students' learning achievement: Evidence from the Philippines," IFPRI discussion papers 1121, International Food Policy Research Institute (IFPRI).
  5. Laborde Debucquet, David & Martin, Will & van der Mensbrugghe, Dominique, 2011. "Measuring the impacts of global trade reform with optimal aggregators of distortions:," IFPRI discussion papers 1123, International Food Policy Research Institute (IFPRI).
  6. Gardebroek, Cornelis & Hernandez, Manuel A., 2013. "Do energy prices stimulate food price volatility? Examining volatility transmission between US oil, ethanol and corn markets," Energy Economics, Elsevier, vol. 40(C), pages 119-129.
  7. repec:fpr:export:1344 is not listed on IDEAS
  8. Cai, Ximing & Yang, Yi-Chen E. & Zhao, Jianshi & Ringler, Claudia, 2011. "Can water allocation in the Yellow River basin be improved?: Insights from a multi-agent system model," IFPRI discussion papers 1117, International Food Policy Research Institute (IFPRI).
  9. Listorti, Giulia & Esposti, Roberto, 2012. "Horizontal Price Transmission in Agricultural Markets: Fundamental Concepts and Open Empirical Issues," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), issue 1, April.
  10. Yu, Bingxin & Nin-Pratt, Alejandro & Funes, José & Gemessa, Sinafikeh Asrat, 2011. "Cereal production and technology adoption in Ethiopia:," IFPRI discussion papers 1131, International Food Policy Research Institute (IFPRI).
  11. Morley, Samuel & Piñeiro, Valeria & Robinson, Sherman, 2011. "A dynamic computable general equilibrium model with working capital for Honduras:," IFPRI discussion papers 1130, International Food Policy Research Institute (IFPRI).
  12. Glendenning, Claire J. & Asenso-Okyere, Kwadwo & Babu, Suresh C., 2011. "Evaluation of value-added agricultural advisory services: Case study of agriclinics in Southern India," IFPRI discussion papers 1125, International Food Policy Research Institute (IFPRI).
  13. Zambrano, Patricia & Maldonado, Jorge H. & Mendoza, Sandra L. & Ruiz, Lorena & Fonseca, Luz Amparo & Cardona, Iván, 2011. "Women cotton farmers: Their perceptions and experiences with transgenic varieties: A case study for Colombia," IFPRI discussion papers 1118, International Food Policy Research Institute (IFPRI).
  14. Prasad, Sanjay K. & Pullabhotla, Hemant & Ganesh-Kumar, A., 2011. "Supply and demand for cereals in Nepal, 2010–2030:," IFPRI discussion papers 1120, International Food Policy Research Institute (IFPRI).

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