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Energy and Agricultural Commodity Markets Interaction: An Analysis of Crude Oil, Natural Gas, Corn, Soybean, and Ethanol Prices

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  • Song-Zan Chiou-Wei
  • Sheng-Hung Chen
  • Zhen Zhu

Abstract

This paper broadens the analysis of the interactions between energy and agricultural commodity markets by focusing on five major commodities: oil, natural gas, soybean, corn, and ethanol, and intends to provide more updated information regarding the degree of the connection among the markets. We estimate a DCC-MGARCH model to accommodate the dynamic and changing degree of interconnections among the five markets with respect to price levels and price volatilities. In doing so, we control for additional economic variables including oil and gas inventories, interest rate spread, exchange rate and economic activities. Our empirical evidence suggests that there are varying degrees of interconnections among the energy and agricultural commodities in the long term as well as the short term, but the interactions among the agricultural commodities and ethanol are generally higher than the interactions between oil and gas and agricultural markets. In addition, we reveal some weak evidence of commodity market speculation. The estimated conditional volatility correlations suggest that volatility spillovers among the markets were time dependent and dynamic.

Suggested Citation

  • Song-Zan Chiou-Wei & Sheng-Hung Chen & Zhen Zhu, 2019. "Energy and Agricultural Commodity Markets Interaction: An Analysis of Crude Oil, Natural Gas, Corn, Soybean, and Ethanol Prices," The Energy Journal, , vol. 40(2), pages 265-296, March.
    • Handle: RePEc:sae:enejou:v:40:y:2019:i:2:p:265-296
    DOI: 10.5547/01956574.40.2.schi
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    References listed on IDEAS

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    1. Du, Xiaodong & Yu, Cindy L. & Hayes, Dermot J., 2011. "Speculation and volatility spillover in the crude oil and agricultural commodity markets: A Bayesian analysis," Energy Economics, Elsevier, vol. 33(3), pages 497-503, May.
    2. Serra, Teresa, 2011. "Volatility spillovers between food and energy markets: A semiparametric approach," Energy Economics, Elsevier, vol. 33(6), pages 1155-1164.
    3. Lutz Kilian & Bruce Hicks, 2013. "Did Unexpectedly Strong Economic Growth Cause the Oil Price Shock of 2003–2008?," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 32(5), pages 385-394, August.
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    1. Nonelelo Vuba & Thobekile Qabhobho, 2024. "The Risk Transfer among Exchange Rates, Energy Commodities, and Agricultural Commodity Prices in SADC Countries," International Journal of Energy Economics and Policy, Econjournals, vol. 14(2), pages 287-298, March.
    2. Yaoxun Deng & Guobin Fang & Jun Zhang & Huimin Ma, 2024. "Dynamic Connectedness Among Oil, Food Commodity, and Renewable Energy Markets: Novel Perspective from Quantile Dependence and Deep Learning," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(3), pages 9935-9974, September.
    3. Puneet Vatsa & Jungho Baek, 2024. "Does agricultural trade respond asymmetrically to oil price shocks? Evidence from New Zealand," Australian Economic Papers, Wiley Blackwell, vol. 63(4), pages 553-569, December.
    4. Ni, Guohua & Teng, Man & Chen, Zhenling & Wu, Yunsong & He, Wenjia & Su, Bin, 2024. "Exploring the impacts of major events on the global oil and food markets," Socio-Economic Planning Sciences, Elsevier, vol. 95(C).

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