IDEAS home Printed from https://ideas.repec.org/a/eme/jadeep/jadee-02-2022-0027.html

The linkage between international dairy commodity prices and volatility: a panel-GARCH analysis

Author

Listed:
  • Anthony N. Rezitis
  • Ourania A. Tremma

Abstract

Purpose - The study's purpose is to investigate the price volatility of four dairy commodities (skim milk powder [SMP], whole milk powder [WMP], butter and cheddar cheese) in the three most significant regional markets (EU, Oceania and US) in the international dairy market. Design/methodology/approach - The study uses a panel-Generalized Autoregressive Conditional Heteroskedastic (panel-GARCH) modeling technique and data from January 12, 2001, to April 28, 2017. Findings - Conditional volatility was higher during subperiods 2007–2010 and 2014–2016 when conditional cross-correlations between prices had the lowest values. In some cases, they were negative (i.e. between the EU and the USA and between Oceania and the USA for both butter and cheese). Interdependence across the three dairy markets, especially for SMP and WMP markets and for the butter market between EU and Oceania is also strongly evidenced. Interdependence is responsible for the spillover of price shocks across the three regions. Research limitations/implications - The data set used should be extended to cover the COVID-19 pandemic period. Originality/value - This is the first study to use panel-GARCH to examine international dairy prices and volatility linkages, where previous studies mainly used multivariate GARCH models. Panel-GARCH allows a high-dimensional data series (i.e. 12 dairy prices) and generates potential efficiency gains in estimating conditional variances and covariances by incorporating information about heterogeneity across markets and considering their interdependence.

Suggested Citation

  • Anthony N. Rezitis & Ourania A. Tremma, 2022. "The linkage between international dairy commodity prices and volatility: a panel-GARCH analysis," Journal of Agribusiness in Developing and Emerging Economies, Emerald Group Publishing Limited, vol. 13(5), pages 685-705, April.
    • Handle: RePEc:eme:jadeep:jadee-02-2022-0027
    DOI: 10.1108/JADEE-02-2022-0027
    as

    Download full text from publisher

    File URL: https://www.emerald.com/insight/content/doi/10.1108/JADEE-02-2022-0027/full/html?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://www.emerald.com/insight/content/doi/10.1108/JADEE-02-2022-0027/full/pdf?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1108/JADEE-02-2022-0027?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
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Kenneth Baltzer, 2013. "International to Domestic Price Transmission in Fourteen Developing Countries During the 2007-08 Food Crisis," WIDER Working Paper Series wp-2013-031, World Institute for Development Economic Research (UNU-WIDER).
    2. Jian Yang & Michael Haigh & David Leatham, 2001. "Agricultural liberalization policy and commodity price volatility: a GARCH application," Applied Economics Letters, Taylor & Francis Journals, vol. 8(9), pages 593-598.
    3. Alejandro Acosta & Alberto Valdés, 2014. "Vertical Price Transmission of Milk Prices: Are Small Dairy Producers Efficiently Integrated Into Markets?," Agribusiness, John Wiley & Sons, Ltd., vol. 30(1), pages 56-63, January.
    4. Rezitis, Anthony N. & Kastner, Gregor, 2021. "On the joint volatility dynamics in international dairy commodity markets," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 60(2), January.
    5. Christopher Gilbert & Wyn Morgan, 2010. "Has food price volatility risen?," Department of Economics Working Papers 1002, Department of Economics, University of Trento, Italia.
    6. Chavas, Jean-Paul & Kim, Kwansoo, 2005. "An Econometric Analysis of Price Dynamics in the Presence of a Price Floor: The Case of American Cheese," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 37(1), pages 21-35, April.
    7. Panos Fousekis & Emmanouil Trachanas, 2016. "Price transmission in the international skim milk powder markets," Applied Economics, Taylor & Francis Journals, vol. 48(54), pages 5233-5245, November.
    8. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-1072, June.
    9. Anthony N. Rezitis & Andreas Rokopanos, 2019. "Impact of trade liberalisation on dairy market price co‐movements between the EU, Oceania, and the United States," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 63(3), pages 472-498, July.
    10. Baltzer, Kenneth, 2013. "International to Domestic Price Transmission in Fourteen Developing Countries During the 2007-08 Food Crisis," WIDER Working Paper Series 031, World Institute for Development Economic Research (UNU-WIDER).
    11. Christos Bouras & Christina Christou & Rangan Gupta & Tahir Suleman, 2020. "Geopolitical Risks, Returns, and Volatility in Emerging Stock Markets: Evidence from a Panel GARCH Model," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 55(8), pages 1841-1856, July.
    12. Pratap Birthal & Akanksha Negi & P.K. Joshi, 2019. "Understanding causes of volatility in onion prices in India," Journal of Agribusiness in Developing and Emerging Economies, Emerald Group Publishing Limited, vol. 9(3), pages 255-275, June.
    13. Jean-Paul Chavas & Kwansoo Kim, 2004. "A Heteroskedastic Multivariate Tobit Analysis of Price Dynamics in the Presence of Price Floors," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(3), pages 576-593.
    14. Diego Escobari & Jim Lee, 2014. "Demand uncertainty and capacity utilization in airlines," Empirical Economics, Springer, vol. 47(1), pages 1-19, August.
    15. Alejandro Acosta & Rico Ihle & Miguel Robles, 2014. "Spatial Price Transmission of Soaring Milk Prices From Global to Domestic Markets," Agribusiness, John Wiley & Sons, Ltd., vol. 30(1), pages 64-73, January.
    16. Nicholas Apergis & Anthony Rezitis, 2003. "Agricultural price volatility spillover effects: the case of Greece," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 30(3), pages 389-406, September.
    17. Panos Fousekis & Vasilis Grigoriadis, 2016. "Price co-movement in the principal skim milk powder producing regions: a wavelet analysis," Economics Bulletin, AccessEcon, vol. 36(1), pages 477-492.
    18. Szenderák, János & Popp, József & Harangi-Rákos, Mónika, . "Price and Volatility Spillovers of the Producer Price of Milk between some EU Member States," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 68(2).
    19. Jean-Paul Chavas & Kwansoo Kim, 2006. "An econometric analysis of the effects of market liberalization on price dynamics and price volatility," Empirical Economics, Springer, vol. 31(1), pages 65-82, March.
    20. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
    21. Dawe, David, . "Cereal Price Transmission in Several Large Asian Countries during the Global Food Crisis," Asian Journal of Agriculture and Development, Southeast Asian Regional Center for Graduate Study and Research in Agriculture (SEARCA), vol. 6(01), pages 1-12.
    22. Lee, Jim, 2010. "The link between output growth and volatility: Evidence from a GARCH model with panel data," Economics Letters, Elsevier, vol. 106(2), pages 143-145, February.
    23. Wang, Yudong & Wu, Chongfeng & Yang, Li, 2014. "Oil price shocks and agricultural commodity prices," Energy Economics, Elsevier, vol. 44(C), pages 22-35.
    24. Na Li & Alan Ker & Abdoul G. Sam & Satheesh Aradhyula, 2017. "Modeling regime-dependent agricultural commodity price volatilities," Agricultural Economics, International Association of Agricultural Economists, vol. 48(6), pages 683-691, November.
    25. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
    26. John, Adam, 2013. "Price relations between export and domestic rice markets in Thailand," Food Policy, Elsevier, vol. 42(C), pages 48-57.
    27. Dennis Bergmann & Declan O’Connor & Andreas Thümmel, 2016. "An analysis of price and volatility transmission in butter, palm oil and crude oil markets," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 4(1), pages 1-23, December.
    28. López Cabrera, Brenda & Schulz, Franziska, 2016. "Volatility linkages between energy and agricultural commodity prices," Energy Economics, Elsevier, vol. 54(C), pages 190-203.
    29. David Dawe, 2009. "Cereal Price Transmission in Several Large Asian Countries during the Global Food Crisis," Asian Journal of Agriculture and Development, Southeast Asian Regional Center for Graduate Study and Research in Agriculture (SEARCA), vol. 6(1), pages 1-12, June.
    30. Malte Müller & Markus Hanisch & Agustina Malvido & Jens Rommel & Julian Sagebiel, 2018. "The structural effect of cooperatives on price volatility in the European dairy sector," Applied Economics Letters, Taylor & Francis Journals, vol. 25(8), pages 576-579, May.
    31. Panos Fousekis & Christos Emmanouilides & Vasilis Grigoriadis, 2017. "Price linkages in the international skim milk powder market: empirical evidence from nonparametric and time-varying copulas," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 61(1), pages 135-153, January.
    32. Teresa Serra & José M. Gil, 2013. "Price volatility in food markets: can stock building mitigate price fluctuations?," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 40(3), pages 507-528, July.
    33. Anthony N. Rezitis & Dimitrios N. Pachis, 2020. "Investigating the price volatility transmission mechanisms of selected fresh vegetable chains in Greece," Journal of Agribusiness in Developing and Emerging Economies, Emerald Group Publishing Limited, vol. 10(5), pages 587-611, April.
    34. Fousekis, Panos & Grigoriadis, Vasilis, 2016. "Spatial price dependence by time scale: Empirical evidence from the international butter markets," Economic Modelling, Elsevier, vol. 54(C), pages 195-204.
    35. Bohl, Martin T. & Sulewski, Christoph, 2019. "The impact of long-short speculators on the volatility of agricultural commodity futures prices," Journal of Commodity Markets, Elsevier, vol. 16(C).
    36. Fousekis, Panos & Emmanouilides, Christos & Grigoriadis, Vasilis, 2017. "Price linkages in the international skim milk powder market: empirical evidence from nonparametric and time-varying copulas," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 61(01), January.
    37. David S. Jacks & Kevin H. O'Rourke & Jeffrey G. Williamson, 2011. "Commodity Price Volatility and World Market Integration since 1700," The Review of Economics and Statistics, MIT Press, vol. 93(3), pages 800-813, August.
    38. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
    39. John Baffes & Bruce Gardner, 2003. "The transmission of world commodity prices to domestic markets under policy reforms in developing countries," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 6(3), pages 159-180.
    Full references (including those not matched with items on IDEAS)

    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. Rezitis, Anthony N. & Kastner, Gregor, 2021. "On the joint volatility dynamics in international dairy commodity markets," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 60(2), January.
    2. Anthony N. Rezitis & Gregor Kastner, 2021. "On the joint volatility dynamics in dairy markets," Papers 2104.12707, arXiv.org.
    3. Lee, Jim & Valera, Harold Glenn, 2015. "Price Transmission and Volatility Spillovers in Asian Rice Markets: Evidence from a Panel GARCH Model," MPRA Paper 123468, University Library of Munich, Germany.
    4. Rezitis, Anthony N. & Rokopanos, Andreas & Tsionas, Mike G., 2021. "Investigating dynamic price co-movements in the international milk market using copulas: The role of trade agreements," Economic Modelling, Elsevier, vol. 95(C), pages 215-227.
    5. Valera, Harold Glenn & Ashok, Mishra & Valerien, Pede & Takashi, Yamano & David, Dawe, 2023. "Domestic and International Impacts of Rice Export Restrictions: The Recent Case of Indian Non-Basmati Rice," MPRA Paper 123305, University Library of Munich, Germany, revised 18 Mar 2024.
    6. Anthony N. Rezitis & Andreas Rokopanos, 2019. "Impact of trade liberalisation on dairy market price co‐movements between the EU, Oceania, and the United States," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 63(3), pages 472-498, July.
    7. Dimitrios Panagiotou & Athanassios Stavrakoudis, 2023. "Price dependence among the major EU extra virgin olive oil markets: a time scale analysis," Review of Agricultural, Food and Environmental Studies, Springer, vol. 104(1), pages 1-26, March.
    8. Huidan Xue & Chenguang Li & Liming Wang & Wen-Hao Su, 2021. "Spatial Price Transmission and Price Dynamics of Global Butter Export Market under Economic Shocks," Sustainability, MDPI, vol. 13(16), pages 1-24, August.
    9. Bathia, Deven & Bouras, Christos & Demirer, Riza & Gupta, Rangan, 2020. "Cross-border capital flows and return dynamics in emerging stock markets: Relative roles of equity and debt flows," Journal of International Money and Finance, Elsevier, vol. 109(C).
    10. Wilman-Santiago Ochoa-Moreno & Byron Alejandro Quito & Carlos Andrés Moreno-Hurtado, 2021. "Foreign Direct Investment and Environmental Quality: Revisiting the EKC in Latin American Countries," Sustainability, MDPI, vol. 13(22), pages 1-18, November.
    11. Chebli Mongi & Kais Saidi, 2024. "The Impact of Corruption, Government Effectiveness, FDI, and GFC on Economic Growth: New Evidence from Global Panel of 48 Middle-Income Countries," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(3), pages 10696-10721, September.
    12. Jacobo Campo & Henry Mendoza, 2018. "Gasto público y crecimiento económico: un análisis regional para Colombia, 1984-2012," Revista Lecturas de Economía, Universidad de Antioquia, CIE, issue 88, pages 77-108.
    13. Tsangyao Chang & Tsung-Pao Wu & Rangan Gupta, 2015. "Are house prices in South Africa really nonstationary? Evidence from SPSM-based panel KSS test with a Fourier function," Applied Economics, Taylor & Francis Journals, vol. 47(1), pages 32-53, January.
    14. António Afonso & Catarina Farinha Miranda, 2025. "Compliance With Fiscal Sustainability And The Euro," Working Papers REM 2025/0371, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    15. Carlos Alberto Barreto Nieto & Jacobo Campo Robledo, 2012. "Relación a largo plazo entre consumo de energía y PIB en América Latina: Una evaluación empírica con datos panel," Revista Ecos de Economía, Universidad EAFIT.
    16. Hakimi, Abdelaziz & Hamdi, Helmi, 2016. "Trade liberalization, FDI inflows, environmental quality and economic growth: A comparative analysis between Tunisia and Morocco," Renewable and Sustainable Energy Reviews, Elsevier, vol. 58(C), pages 1445-1456.
    17. Guneratne B Wickremasinghe & Jae H Kim, 2008. "Weak-Form Efficiency of Foreign Exchange Markets of Developing Economies," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 7(2), pages 169-196, August.
    18. Alberto Bagnai, 2010. "CEEC vs. PIGS: a comparative panel assessment of financial sustainability and twin deficits," Working Papers LuissLab 1088, Dipartimento di Economia e Finanza, LUISS Guido Carli.
    19. Mulatu F. Zehirun & Marthinus C. Breitenbach & Francis M. Kemegue, 2015. "Assessment of Monetary Union in SADC: Evidence from Cointegration and Panel Unit Root Tests," Working Papers 201502, University of Pretoria, Department of Economics.
    20. Stewart, Shamar L. & Isengildina Massa, Olga, 2024. "Food & Oil Price Volatility Dynamics: Insights from a TVP-SVAR-DCC-MIDAS Model," 2024 Annual Meeting, July 28-30, New Orleans, LA 343936, Agricultural and Applied Economics Association.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

    Statistics

    Access and download statistics

    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:eme:jadeep:jadee-02-2022-0027. See general information about how to correct material in RePEc.

    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: Emerald Support (email available below). General contact details of provider: .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.