Price volatility transfer between agricultural and energy markets – the perspective of European markets during the COVID-19 pandemic and the Russian-Ukrainian war

Margaret Just and Krzysztof Echaust

Village and Agriculture (Wieś i Rolnictwo), 2023, vol. 199, issue 2

Abstract: The aim of the study was to assess the price volatility relationships between five futures markets from Euronext and ICE: wheat, corn, rapeseed, Brent crude oil and natural gas in the period January 2017–January 2023, and in particular to indicate the markets that were the dominant source of volatility among the considered ones. The Diebold–Yilmaz volatility transfer index based on the generalized decomposition of the forecast error variance and its Baruník–Křehlík frequency domain extension were used to conduct this assessment. The period from the outbreak of the COVID-19 pandemic to the beginning of 2023 is associated with an increase in price volatility in the food and energy markets. During the COVID-19 pandemic, the volatility transfer effect between markets was twice as strong as in 2017–2019, and during the Russian-Ukrainian war it was three times stronger. The main source of market shocks during the spread of the SARS-CoV-2 virus was the rapeseed market, while during the war in Ukraine this role was taken over by the wheat market. Volatility was not transmitted immediately, thus providing an opportunity to implement risk management procedures that would mitigate the impact of shocks from one market to others. This article was developed as part of research project no. UMO-2022/47/B/HS4/01194 “The impact of the conflict in Ukraine on food and energy prices and volatility and risk perception of European Union economies” funded by the National Science Centre in Poland.

Keywords: Agribusiness (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:ags:polvaa:344838

DOI: 10.22004/ag.econ.344838

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