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Asymmetric risk spillovers between oil and agricultural commodities

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  • Shahzad, Syed Jawad Hussain
  • Hernandez, Jose Arreola
  • Al-Yahyaee, Khamis Hamed
  • Jammazi, Rania

Abstract

Increase in agricultural commodities’ prices not only increases economic and social costs, it may also affect health, education and family ties. The dependence and risk transmission between oil prices and the price of agricultural commodities is subject to possible symmetric or asymmetric changes due to legislation in the farm sector in recent times. The objective of this study is to understand the extent to which oil as a global economic factor influences the price behavior of agricultural commodities such as wheat, maize, soybeans, and rice under adverse and prosperous market scenarios. We find evidence of symmetry in the tail dependence between variables, and of asymmetry in the spillovers from oil to agricultural commodities that intensify during financial turmoil. Policymakers and traders of agricultural commodities may benefit by considering the identified asymmetries in co-movements and risk spillovers.

Suggested Citation

  • Shahzad, Syed Jawad Hussain & Hernandez, Jose Arreola & Al-Yahyaee, Khamis Hamed & Jammazi, Rania, 2018. "Asymmetric risk spillovers between oil and agricultural commodities," Energy Policy, Elsevier, vol. 118(C), pages 182-198.
  • Handle: RePEc:eee:enepol:v:118:y:2018:i:c:p:182-198
    DOI: 10.1016/j.enpol.2018.03.074
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    References listed on IDEAS

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    1. repec:eee:energy:v:166:y:2019:i:c:p:577-586 is not listed on IDEAS
    2. Aviral Kumar Tiwari & Goodness C. Aye & Rangan Gupta & Konstantinos Gkillas, 2019. "Gold-Oil Dependence Dynamics and the Role of Geopolitical Risks: Evidence from a Markov-Switching Time-Varying Copula Model," Working Papers 201918, University of Pretoria, Department of Economics.
    3. Afees A. Salisu & Wasiu Adekunle & Zachariah Emmanuel & Wasiu A. Alimi, 2018. "Predicting exchange rate with commodity prices: The role of structural breaks and asymmetries," Working Papers 055, Centre for Econometric and Allied Research, University of Ibadan.
    4. Duc Hong Vo & Tan Ngoc Vu & Anh The Vo & Michael McAleer, 2019. "Modeling the Relationship between Crude Oil and Agricultural Commodity Prices," Energies, MDPI, Open Access Journal, vol. 12(7), pages 1-41, April.

    More about this item

    Keywords

    Oil prices; Agricultural commodities; Static and time-varying copulas; Risk spillovers; CoVaR;

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • G1 - Financial Economics - - General Financial Markets
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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