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The Nonparametric Relationship between Oil and South African Agricultural Prices

Author

Listed:
  • Ahdi N. Ajmi

    () (College of Science and Humanities in Slayel, Salman bin Abdulaziz University, Kingdom of Saudi Arabia)

  • Rangan Gupta

    () (Department of Economics, University of Pretoria)

  • Monique Kruger

    (Department of Economics, University of Pretoria)

  • Nicola Schoeman

    (Department of Economics, University of Pretoria)

  • Leoné Walters

    (Department of Economics, University of Pretoria)

Abstract

The aim of this paper is to investigate the causal relationship between agricultural prices in South Africa and global oil prices. A nonlinear Granger causality test based on moment conditions, introduced by Nishiyama et al (2011) is employed and we find that there is indeed a causal relationship between global oil prices and certain South African agricultural commodity prices. The mean price of wheat, sunflower and soya are Granger caused by OPEC basket oil price. OPEC basket oil prices also cause volatility of wheat, sunflower seed and sorghum prices.

Suggested Citation

  • Ahdi N. Ajmi & Rangan Gupta & Monique Kruger & Nicola Schoeman & Leoné Walters, 2014. "The Nonparametric Relationship between Oil and South African Agricultural Prices," Working Papers 201461, University of Pretoria, Department of Economics.
  • Handle: RePEc:pre:wpaper:201461
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    References listed on IDEAS

    as
    1. Vincent, David P. & Dixon, Peter B. & Parmenter, B.R. & Sams, D.C., 1979. "The Short-Term Effect Of Domestic Oil Price Increases On The Australian Economy With Special Reference To The Agricultural Sector," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 0(Number 2), pages 1-23, August.
    2. Richard Ajayi & Apostolos Serletis, 2009. "Testing for causality in the transmission of Eurodollar and US interest rates," Applied Financial Economics, Taylor & Francis Journals, vol. 19(6), pages 439-443.
    3. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
    4. Nishiyama, Yoshihiko & Hitomi, Kohtaro & Kawasaki, Yoshinori & Jeong, Kiho, 2011. "A consistent nonparametric test for nonlinear causality—Specification in time series regression," Journal of Econometrics, Elsevier, vol. 165(1), pages 112-127.
    5. Hiemstra, Craig & Jones, Jonathan D, 1994. " Testing for Linear and Nonlinear Granger Causality in the Stock Price-Volume Relation," Journal of Finance, American Finance Association, vol. 49(5), pages 1639-1664, December.
    6. Avalos, Fernando, 2014. "Do oil prices drive food prices? The tale of a structural break," Journal of International Money and Finance, Elsevier, vol. 42(C), pages 253-271.
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    Cited by:

    1. Aye, Goodness C., 2016. "Causality between Oil Price and South Africa's Food Price: Time Varying Approach - Relazione di causalità tra prezzo del petrolio e pr ezzo dei prodotti alimentari in Sud Africa: un approccio time var," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 69(3), pages 193-212.

    More about this item

    Keywords

    Agricultural prices; Oil prices; Granger causality; Nonlinearity; South Africa;

    JEL classification:

    • 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
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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