Interdependence among Agricultural Commodity Markets, Macroeconomic Factors, Crude Oil and Commodity Index

Jose Fernandez and Bruce Morley
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Jose Fernandez: University of Bath

No 42/15, Department of Economics Working Papers from University of Bath, Department of Economics

Abstract: This paper examines the degree of interdependence between three agricultural commodity prices, crude oil price returns, macroeconomic variables and the S&P GSCI commodity returns index. We apply Aielli (2013) cDCC model using monthly data from 1982 to 2012 to estimate the dynamic correlations of the returns series and endogenously detect any structural instability of the dynamic correlations. Our results indicate that crude oil price returns present statistically significant dynamic correlations with all the macroeconomic variables in addition to the GSCI index. Additionally, we detect structural changes in these dynamic correlations mainly associated with the financial crisis of 2008. On the other hand, our results show that there exists no degree of interdependence between maize, soybeans and sugar with crude oil price returns and most of the macroeconomic variables. The exceptions are between soybeans with the U.S. exchange rate and sugar with global economic activity. Nevertheless, only the GSCI index presents significant dynamic correlations with these commodity price returns.

Date: 2015-10-26
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Related works:
Journal Article: Interdependence among agricultural commodity markets, macroeconomic factors, crude oil and commodity index (2019)
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