IDEAS home Printed from https://ideas.repec.org/a/ags/aareaj/241879.html
   My bibliography  Save this article

El Ni~no southern oscillation and its effects on world vegetable oil prices: assessing asymmetries using smooth transition models

Author

Listed:
  • Ubilava, David
  • holt, Matt

Abstract

In this research, we examine the effects of El Ni~no southern oscillation (ENSO) on market dynamics of major vegetable oil prices. We adopt a smooth transition vector error correction modelling framework to analyse the impacts of ENSO events on the vegetable oil prices and, more interestingly, to investigate the asymmetric nature of the ENSO dynamics and price responses to ENSO shocks. The results confirm selfexciting type nonlinearities in the ENSO dynamics, and presence of the so-called transactions cost band in the system of vegetable oil prices. These nonlinearities yield the history-specific asymmetries in the vegetable oil price dynamics, wherein effects of ENSO shocks on the ENSO dynamics and the vegetable oil prices vary considerably between different ENSO regimes. In general, positive deviations, El Ni~no events, result in the vegetable oil price increase, while negative deviations, La Ni~na events, result in decrease in the prices. We illustrate these effects using generalised impulseresponse functions and the derived asymmetry measures.

Suggested Citation

  • Ubilava, David & holt, Matt, 2013. "El Ni~no southern oscillation and its effects on world vegetable oil prices: assessing asymmetries using smooth transition models," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 57(2), pages 1-25.
  • Handle: RePEc:ags:aareaj:241879
    DOI: 10.22004/ag.econ.241879
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/241879/files/ajar616.pdf
    Download Restriction: no

    File URL: https://libkey.io/10.22004/ag.econ.241879?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Barry K. Goodwin & Matthew T. Holt & Jeffrey P. Prestemon, 2011. "North American Oriented Strand Board Markets, Arbitrage Activity, and Market Price Dynamics: A Smooth Transition Approach," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 93(4), pages 993-1014.
    2. Balke, Nathan S & Fomby, Thomas B, 1997. "Threshold Cointegration," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(3), pages 627-645, August.
    3. David Ubilava, 2012. "Modeling Nonlinearities in the U.S. Soybean‐to‐Corn Price Ratio: A Smooth Transition Autoregression Approach," Agribusiness, John Wiley & Sons, Ltd., vol. 28(1), pages 29-41, January.
    4. Maximo Camacho, 2004. "Vector smooth transition regression models for US GDP and the composite index of leading indicators," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 23(3), pages 173-196.
    5. Milas Costas & Legrenzi Gabriella, 2006. "Non-linear Real Exchange Rate Effects in the UK Labour Market," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 10(1), pages 1-34, March.
    6. Allan D. Brunner, 2002. "El Niño and World Primary Commodity Prices: Warm Water or Hot Air?," The Review of Economics and Statistics, MIT Press, vol. 84(1), pages 176-183, February.
    7. Walter C. Labys, 1977. "Multicommodity substitution patterns in the international fats and oils market," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 4(1), pages 75-84.
    8. Jansen, Eilev S & Terasvirta, Timo, 1996. "Testing Parameter Constancy and Super Exogeneity in Econometric Equations," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(4), pages 735-763, November.
    9. Balagtas, Joseph Valdes & Holt, Matthew T., 2008. "AJAE Appendix: The Commodity Terms of Trade, Unit Roots, and Nonlinear Alternatives," American Journal of Agricultural Economics APPENDICES, Agricultural and Applied Economics Association, vol. 91(1), pages 1-21, April.
    10. In, Francis & Inder, Brett, 1997. "Long‐run Relationships Between World Vegetable Oil Prices," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 41(4), pages 1-16.
    11. Milas, Costas & Rothman, Philip, 2008. "Out-of-sample forecasting of unemployment rates with pooled STVECM forecasts," International Journal of Forecasting, Elsevier, vol. 24(1), pages 101-121.
    12. Ker, Alan P. & McGowan, Pat, 2000. "Weather-Based Adverse Selection And The U.S. Crop Insurance Program: The Private Insurance Company Perspective," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 25(2), pages 1-25, December.
    13. Potter, Simon M, 1995. "A Nonlinear Approach to US GNP," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 10(2), pages 109-125, April-Jun.
    14. Rothman, Philip & van Dijk, Dick & , Philip Hans, 2001. "Multivariate Star Analysis Of Money–Output Relationship," Macroeconomic Dynamics, Cambridge University Press, vol. 5(4), pages 506-532, September.
    15. Letson, David & McCullough, B.D., 2001. "ENSO and Soybean Prices: Correlation without Causality," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 33(3), pages 513-521, December.
    16. Berry, Brian J.L. & Okulicz-Kozaryn, Adam, 2008. "Are there ENSO signals in the macroeconomy," Ecological Economics, Elsevier, vol. 64(3), pages 625-633, January.
    17. Joseph V. Balagtas & Matthew T. Holt, 2009. "The Commodity Terms of Trade, Unit Roots, and Nonlinear Alternatives: A Smooth Transition Approach," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(1), pages 87-105.
    18. Temin, Peter, 2002. "Price Behavior in Ancient Babylon," Explorations in Economic History, Elsevier, vol. 39(1), pages 46-60, January.
    19. van Dijk, Dick & Franses, Philip Hans & Paap, Richard, 2002. "A nonlinear long memory model, with an application to US unemployment," Journal of Econometrics, Elsevier, vol. 110(2), pages 135-165, October.
    20. A. D. Owen & K. Chowdhury & J. R. R. Garrido, 1997. "Price interrelationships in the vegetable and tropical oils market," Applied Economics, Taylor & Francis Journals, vol. 29(1), pages 119-124.
    21. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-384, March.
    22. Lin, Chien-Fu Jeff & Terasvirta, Timo, 1994. "Testing the constancy of regression parameters against continuous structural change," Journal of Econometrics, Elsevier, vol. 62(2), pages 211-228, June.
    23. Matthew T. Holt & Lee A. Craig, 2006. "Nonlinear Dynamics and Structural Change in the U.S. Hog—Corn Cycle: A Time-Varying STAR Approach," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(1), pages 215-233.
    24. Hall, Anthony D. & Skalin, Joakim & Teräsvirta, Timo, 1998. "A nonlinear time series model of El Niño," SSE/EFI Working Paper Series in Economics and Finance 263, Stockholm School of Economics.
    25. Koop, Gary & Pesaran, M. Hashem & Potter, Simon M., 1996. "Impulse response analysis in nonlinear multivariate models," Journal of Econometrics, Elsevier, vol. 74(1), pages 119-147, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ivan Djuric & Linde Götz & Thomas Glauben, 2015. "Are Export Restrictions an Effective Instrument to Insulate Domestic Prices Against Skyrocketing World Market Prices? The Wheat Export Ban in Serbia," Agribusiness, John Wiley & Sons, Ltd., vol. 31(2), pages 215-228, April.
    2. Alejandro Plastina & Sergio H. Lence & Ariel Ortiz‐Bobea, 2021. "How weather affects the decomposition of total factor productivity in U.S. agriculture," Agricultural Economics, International Association of Agricultural Economists, vol. 52(2), pages 215-234, March.
    3. Massimo Peri, 2017. "Climate variability and the volatility of global maize and soybean prices," Food Security: The Science, Sociology and Economics of Food Production and Access to Food, Springer;The International Society for Plant Pathology, vol. 9(4), pages 673-683, August.
    4. Jesse Tack & David Ubilava, 2013. "The effect of El Niño Southern Oscillation on U.S. corn production and downside risk," Climatic Change, Springer, vol. 121(4), pages 689-700, December.
    5. Jesse B. Tack & David Ubilava, 2015. "Climate and agricultural risk: measuring the effect of ENSO on U.S. crop insurance," Agricultural Economics, International Association of Agricultural Economists, vol. 46(2), pages 245-257, March.
    6. Smith, Sarah C. & Ubilava, David, 2017. "The El Niño Southern Oscillation and Economic Growth in the Developing World," Working Papers 2017-11, University of Sydney, School of Economics, revised May 2017.
    7. Ubilava, David, 2017. "The ENSO Effect and Asymmetries in Wheat Price Dynamics," World Development, Elsevier, vol. 96(C), pages 490-502.
    8. Peri, Massimo, 2015. "Cliamte Variability and Agricultural Price volatility: the case of corn and soybeans," 2015 Conference, August 9-14, 2015, Milan, Italy 212623, International Association of Agricultural Economists.
    9. David Ubilava, 2018. "The Role of El Niño Southern Oscillation in Commodity Price Movement and Predictability," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 100(1), pages 239-263.
    10. Stephan von Cramon-Taubadel, 2017. "The analysis of market integration and price transmission – results and implications in an African context," Agrekon, Taylor & Francis Journals, vol. 56(2), pages 83-96, April.
    11. Bernhard Brümmer & Olaf Korn & Kristina Schlüßler & Tinoush Jamali Jaghdani, 2016. "Volatility in Oilseeds and Vegetable Oils Markets: Drivers and Spillovers," Journal of Agricultural Economics, Wiley Blackwell, vol. 67(3), pages 685-705, September.
    12. David Ubilava, 2012. "El Niño, La Niña, and world coffee price dynamics," Agricultural Economics, International Association of Agricultural Economists, vol. 43(1), pages 17-26, January.
    13. Ubilava, David & Villoria, Nelson, 2013. "Do the Trade Winds Alter the Trade Flow? Assessing Impacts of ENSO Shocks on World Cereal Supply," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150516, Agricultural and Applied Economics Association.
    14. David Ubilava, 2014. "El Niño Southern Oscillation and the fishmeal–soya bean meal price ratio: regime-dependent dynamics revisited," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 41(4), pages 583-604.
    15. Davinson Stev Abril‐Salcedo & Luis Fernando Melo‐Velandia & Daniel Parra‐Amado, 2020. "Nonlinear relationship between the weather phenomenon El niño and Colombian food prices," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 64(4), pages 1059-1086, October.
    16. 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), vol. 1(1), pages 1-28, April.
    17. Ubilava, David & Orlowski, Jan, 2016. "The Predictive Content of Climate Anomalies for Agricultural Production: Does ENSO Really Matter?," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 236281, Agricultural and Applied Economics Association.
    18. Daniel Parra-Amado & Davinson Stev Abril-Salcedo & Luis Fernando Melo-Velandia, 2016. "Impactos de los fenómenos climáticos sobre el precio de los alimentos en Colombia," Revista ESPE - Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 34(80), pages 146-158, June.
    19. Pede, Valerien O. & Valera, Harold Glenn A. & Alam, Mohammad Jahangir & McKenzie, Andrew M., 2013. "Nonlinearities in Regional Rice Prices in the Philippines: Evidence from a Smooth Transition Autoregressive (STAR) Approach," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150246, Agricultural and Applied Economics Association.
    20. Valeria Bejarano-Salcedo & Juan Manuel Julio-Román & Edgar Caicedo-García & Julián Alonso Cárdenas-Cárdenas, 2020. "Entendiendo, Modelando y Pronosticando el Efecto de “El Niño” Sobre los Precios de los Alimentos: El Caso Colombiano," Borradores de Economia 1102, Banco de la Republica de Colombia.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. David Ubilava & Matt Holt, 2013. "El Niño southern oscillation and its effects on world vegetable oil prices: assessing asymmetries using smooth transition models," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 57(2), pages 273-297, April.
    2. Ubilava, David, 2017. "The ENSO Effect and Asymmetries in Wheat Price Dynamics," World Development, Elsevier, vol. 96(C), pages 490-502.
    3. David Ubilava, 2014. "El Niño Southern Oscillation and the fishmeal–soya bean meal price ratio: regime-dependent dynamics revisited," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 41(4), pages 583-604.
    4. David Ubilava, 2012. "El Niño, La Niña, and world coffee price dynamics," Agricultural Economics, International Association of Agricultural Economists, vol. 43(1), pages 17-26, January.
    5. David Ubilava, 2012. "Modeling Nonlinearities in the U.S. Soybean‐to‐Corn Price Ratio: A Smooth Transition Autoregression Approach," Agribusiness, John Wiley & Sons, Ltd., vol. 28(1), pages 29-41, January.
    6. David Ubilava, 2018. "The Role of El Niño Southern Oscillation in Commodity Price Movement and Predictability," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 100(1), pages 239-263.
    7. Goodwin, Barry K. & Holt, Matthew T. & Prestemon, Jeffrey P., 2019. "Nonlinear exchange rate pass-through in timber products: The case of oriented strand board in Canada and the United States," The North American Journal of Economics and Finance, Elsevier, vol. 50(C).
    8. Davinson Stev Abril‐Salcedo & Luis Fernando Melo‐Velandia & Daniel Parra‐Amado, 2020. "Nonlinear relationship between the weather phenomenon El niño and Colombian food prices," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 64(4), pages 1059-1086, October.
    9. Hasanov, Mübariz & Araç, Aysen & Telatar, Funda, 2010. "Nonlinearity and structural stability in the Phillips curve: Evidence from Turkey," Economic Modelling, Elsevier, vol. 27(5), pages 1103-1115, September.
    10. Kanazawa, Nobuyuki, 2020. "Radial basis functions neural networks for nonlinear time series analysis and time-varying effects of supply shocks," Journal of Macroeconomics, Elsevier, vol. 64(C).
    11. Ubilava, David, 2013. "El Niño Southern Oscillation and Primary Agricultural Commodity Prices: Causal Inferences from Smooth Transition Models," 2013 Conference (57th), February 5-8, 2013, Sydney, Australia 152202, Australian Agricultural and Resource Economics Society.
    12. Daniel Parra-Amado & Davinson Stev Abril-Salcedo & Luis Fernando Melo-Velandia, 2016. "Impactos de los fenómenos climáticos sobre el precio de los alimentos en Colombia," Revista ESPE - Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 34(80), pages 146-158, June.
    13. Dick van Dijk & Timo Terasvirta & Philip Hans Franses, 2002. "Smooth Transition Autoregressive Models — A Survey Of Recent Developments," Econometric Reviews, Taylor & Francis Journals, vol. 21(1), pages 1-47.
    14. Bekkerman, Anton & Goodwin, Barry K. & Piggott, Nicholas E., 2009. "Spatial Analysis of Market Linkages in North Carolina Using Threshold Autoregression Models with Variable Transaction Costs," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49282, Agricultural and Applied Economics Association.
    15. Filippo Altissimo & Giovanni L. Violante, 2001. "The non-linear dynamics of output and unemployment in the U.S," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(4), pages 461-486.
    16. Peri, Massimo & Baldi, Lucia, 2010. "Vegetable oil market and biofuel policy: An asymmetric cointegration approach," Energy Economics, Elsevier, vol. 32(3), pages 687-693, May.
    17. Dijk, Dick van & Franses, Philip Hans, 1999. "Modeling Multiple Regimes in the Business Cycle," Macroeconomic Dynamics, Cambridge University Press, vol. 3(3), pages 311-340, September.
    18. Kim, Hyeongwoo & Kim, Jintae, 2018. "London calling: Nonlinear mean reversion across national stock markets," The North American Journal of Economics and Finance, Elsevier, vol. 44(C), pages 265-277.
    19. Ubilava, David & Helmers, C Gustav, 2012. "Forecasting ENSO with a smooth transition autoregressive model," MPRA Paper 36890, University Library of Munich, Germany.
    20. Fujin Yi & Mengfei Zhou & Yu Yvette Zhang, 2020. "Value of Incorporating ENSO Forecast in Crop Insurance Programs," American Journal of Agricultural Economics, John Wiley & Sons, vol. 102(2), pages 439-457, March.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:aareaj:241879. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/aaresea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/aaresea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.