Time-varying dependence structure between oil and agricultural commodity markets: A dependence-switching CoVaR copula approach

Satish Kumar, Aviral Tiwari, Ibrahim Raheem and Erik Hille

Resources Policy, 2021, vol. 72, issue C

Abstract: We examine the energy-food nexus using the dependence-switching copula model. Specifically, we look at the dependence for four distinct market states, such as, increasing oil–increasing commodity, declining oil–declining commodity, increasing oil–declining commodity, as well as declining oil–increasing commodity markets. Our results support the argument that the crash of oil markets and agricultural commodities happen at the same time, especially during crisis period. However, the same is not true during times of normal economic conditions, implying that investors cannot make excess profits in both agricultural and oil markets at once. Furthermore, our analysis suggests that the return chasing effect dominates for all commodities on maximum occasions. The CoVaR and ΔCoVaR results indicate important risk spillover from oil to agricultural markets, especially around the financial crisis.

Keywords: Agricultural commodities; Oil; CoVaR; Dependence-switching copula; Tail dependence (search for similar items in EconPapers)
JEL-codes: C58 C63 G11 Q1 Q4 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

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Working Paper: Time-varying dependence structure between oil and agricultural commodity markets: A dependence-switching CoVaR copula approach (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:72:y:2021:i:c:s0301420721000660

DOI: 10.1016/j.resourpol.2021.102049

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