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Food versus Crude Oil: What Do Prices Tell Us? Evidence from China

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  • Wang, Yumeng
  • Zhao, Shuoli
  • Yang, Zhihai
  • Liu, Donald J.

Abstract

This study investigates the causal relationship between the prices of rice, crude oil, wheat, corn and soybean in China, using monthly price data over the period of January 1998 to December 2013. Employing an autoregressive distributed lag (ARDL) bounds test, we explore the cointegration relationship among the price variables. We estimate the ARDL long-run price relationship and the short-run error correction process (ARDL-EC). The results show that rice price are affected by crude oil, wheat, corn and soybean price as the forcing variables. Both the long-run and short-run price transmission elasticity estimates suggest the importance of crude oil price on the formation of rice prices in China. Furthermore, the adjustment speed coefficient is found to be statistically significant, supporting the notion that there is an error correction mechanism for maintaining the long-run price relationship facing short-run shocks.

Suggested Citation

  • Wang, Yumeng & Zhao, Shuoli & Yang, Zhihai & Liu, Donald J., 2014. "Food versus Crude Oil: What Do Prices Tell Us? Evidence from China," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 170578, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea14:170578
    DOI: 10.22004/ag.econ.170578
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    Cited by:

    1. Eissa, Mohamad Abdelaziz & Al Refai, Hisham, 2019. "Modelling the symmetric and asymmetric relationships between oil prices and those of corn, barley, and rapeseed oil," Resources Policy, Elsevier, vol. 64(C).
    2. Zhang, Youwang & Li, Chogguang & Xu, Yuanyuan & Li, Jian, 2020. "An attribution analysis of soybean price volatility in China: global market connectedness or energy market transmission?," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 22(1), July.
    3. You, Siming & Neoh, Koon Gee & Tong, Yen Wah & Dai, Yanjun & Wang, Chi-Hwa, 2017. "Variation of household electricity consumption and potential impact of outdoor PM2.5 concentration: A comparison between Singapore and Shanghai," Applied Energy, Elsevier, vol. 188(C), pages 475-484.

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