Volatility Spillover between Water, Energy and Food

Massimo Peri, Daniela Vandone and Lucia Baldi
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Massimo Peri: Department of Economics, Management and Quantitative Methods, University of Milan, 20122 Milan, Italy
Daniela Vandone: Department of Economics, Management and Quantitative Methods, University of Milan, 20122 Milan, Italy
Lucia Baldi: Department of Food, Environmental and Nutritional Sciences, University of Milan, 20133 Milan, Italy

Sustainability, 2017, vol. 9, issue 6, 1-16

Abstract: Water, energy, and food and are strongly interconnected, and the sustainability of the whole world depends on this link. The aim of this article is to analyze the volatility spillovers between indexes representing the financial component of this nexus. We use a multivariate Generalized Autoregressive Conditional Heteroskedasticity (GARCH) model with daily data in which the water variable is proxy by equity index that represents the performance of the industry involved in water business both at the global and local levels. For the food and energy sectors, we use two sub-indexes of the S&P Goldman Sachs (GS)-Commodity Index. Our results highlight the existence of a financial nexus between water, energy, and food that was particularly exacerbated during 2008 crisis. Evidence therefore suggests the need to better investigate the policy options that can be used to reduce price volatility in a framework of the rising relevance of sustainability issues.

Keywords: water; food; energy; nexus; M-GARCH; volatility spillover (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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