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How far do shocks move across borders?Examining volatility transmission in major agricultural futures markets

Author

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  • Manuel Hernandez
  • Raul Ibarra
  • Danilo Trupkin

    ()

Abstract

This paper examines the level of interdependence and volatility transmission in global agricultural futures markets. We follow a multivariate GARCH approach to explore the dynamics and cross-dynamics of volatility across major exchanges of corn, wheat, and soybeans between the United States, Europe, and Asia. We account for the potential bias that may arise when considering exchanges with dierent closing times. The period of analysis is 2004-2009 for corn and soybeans, and 2005-2009 for wheat. The results indicate that agricultural markets are highly interrelated and there are both own- and cross-volatility spillovers and dependence among most of the exchanges. There is higher interaction between the United States (Chicago) and both Europe and Asia than within the latter. The results further show the major role Chicago plays in terms of spillover eects over the other markets, particularly for corn and wheat. Additionally, the level of interdependence between exchanges has only increased in recent years for some of the commodities. Implications for potential regulatory policies of agricultural futures markets are also briey discussed.

Suggested Citation

  • Manuel Hernandez & Raul Ibarra & Danilo Trupkin, 2011. "How far do shocks move across borders?Examining volatility transmission in major agricultural futures markets," Documentos de Trabajo/Working Papers 1109, Facultad de Ciencias Empresariales y Economia. Universidad de Montevideo..
  • Handle: RePEc:mnt:wpaper:1109
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    File URL: http://www.um.edu.uy/docs/working_paper_um_cee_2011_09.pdf
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Cornelis Gardebroek & Manuel A. Hernandez & Miguel Robles, 2016. "Market interdependence and volatility transmission among major crops," Agricultural Economics, International Association of Agricultural Economists, vol. 47(2), pages 141-155, March.
    2. Yu, Bingxin & Nin-Pratt, Alejandro & Funes, José & Gemessa, Sinafikeh Asrat, 2011. "Cereal production and technology adoption in Ethiopia:," IFPRI discussion papers 1131, International Food Policy Research Institute (IFPRI).
    3. Ceballos, Francisco & Hernandez, Manuel A. & Minot, Nicholas & Robles, Miguel, 2017. "Grain Price and Volatility Transmission from International to Domestic Markets in Developing Countries," World Development, Elsevier, vol. 94(C), pages 305-320.
    4. Kalkuhl, Matthias, 2014. "How Strong Do Global Commodity Prices Influence Domestic Food Prices in Developing Countries? A Global Price Transmission and Vulnerability Mapping Analysis," Discussion Papers 168591, University of Bonn, Center for Development Research (ZEF).
    5. repec:fpr:export:1344 is not listed on IDEAS

    More about this item

    Keywords

    Volatility transmission; agricultural commodities; futures markets; Multivariate GARCH.;

    JEL classification:

    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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