Exploring the time-frequency connectedness and network among crude oil and agriculture commodities V1

Sang Hoon Kang, Aviral Tiwari, Claudiu Albulescu () and Seong-Min Yoon

Energy Economics, 2019, vol. 84, issue C

Abstract: We examine the frequency domain connectedness among international crude oil and agriculture commodities, covering the period of 1990M1-2017M5. The frequency domain connectedness is examined at three frequencies, which roughly correspond to one to six months, six to twelve months, and a period of more than twelve months. We also use a network based on pairwise correlations and a net directional matrix generated from the frequency domain spillover method. We show that the vegetable oils are the most influential price volatility source for the other agriculture commodities, such as dairy, cereals, meat and sugar, but also for the crude oil. In addition, we find a bi-directional and asymmetric connectedness between oil and agriculture commodity markets at all different frequency bands. These findings validate the preliminary results we obtain using a rolling-based bootstrap time-varying Granger causality analysis but provide additional insights as they allow to see the direction and the strength of the volatility at different frequencies. Our findings provide novel information about the production cost channel describing the relationship between oil and agriculture commodity markets. In addition, from the financialization perspective, our results show that agriculture commodity may provide portfolio diversification benefits especially in the short run.

Keywords: Oil and; Agriculture commodity market; Prices connectedness; Frequency domain spillover; Network analysis (search for similar items in EconPapers)
JEL-codes: C58 G11 Q14 Q41 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (67)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:84:y:2019:i:c:s014098831930338x

DOI: 10.1016/j.eneco.2019.104543

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