Fossil fuel price uncertainty and feedstock edible oil prices: Evidence from MGARCH-M and VIRF analysis
Akram Shavkatovich Hasanov,
Hung Xuan Do and
Mohammed Sharaf Shaiban
Energy Economics, 2016, vol. 57, issue C, pages 16-27
This paper focuses on examining the impact of crude oil price volatility on the price changes of major edible oils (rapeseed, soybean, and sunflower), which are the main feedstock for the biodiesel industry in the European Union. For this purpose, a four-variate version of non-diagonal GARCH-in-mean model that allows for asymmetry in the variance–covariance matrix is used. An important conclusion that emerges from this study is that the crude oil price uncertainty appears to be responsible for a significant decline in price returns of major feedstock edible oils considered in this study. The volatility impulse response analyses support the conclusion that the conditional variances of both edible and crude oil and covariances between them are generally highly responsive to historical shock. However, the size of the impacts is mainly commodity specific. Finally, we investigate the causality from crude oil price volatility to edible oil prices and the effects of oil price shocks on edible oil prices by using the Granger causality test and generalized impulse response function analysis, respectively. The empirical results show that there is strong evidence of causality from crude oil price volatility to all edible oil prices under study, and generalized impulse response analysis shows that the edible oil markets significantly respond to the shocks in oil prices.
Keywords: Oil/food price uncertainty; Crude oil; Edible oil; Multivariate GARCH; VIRF (search for similar items in EconPapers)
JEL-codes: C32 Q18 Q42 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: http://EconPapers.repec.org/RePEc:eee:eneeco:v:57:y:2016:i:c:p:16-27
Access Statistics for this article
Energy Economics is currently edited by R. S. J. Tol and J. P. Weyant
More articles in Energy Economics from Elsevier
Series data maintained by Dana Niculescu ().