U.S. grain commodity futures price volatility: Does trade policy uncertainty matter?

Dexiang Mei and Yutang Xie

Finance Research Letters, 2022, vol. 48, issue C

Abstract: The outbreak and continuation of the COVID-19 pandemic have affected the trade policies of various countries and influenced global food security. This paper aims to use U.S. major grain commodity futures price and trade policy uncertainty (TPU) index data to examine the impact of TPU on the volatility of U.S. grain futures prices under the GARCH-MIDAS framework. The in-sample estimates confirm the impact of TPU on the volatility of US grain commodity futures prices. Out-of-sample testing further reveals that considering TPU could improve predictions of future price fluctuations for different grain commodities. Finally, we also consider other uncertainty indices. Since the grain market is often used as a tool to hedge financial risks, this article can provide some advice for investors in times of policy instability and especially trade policy uncertainty.

Keywords: Trade policy uncertainty; Grain markets; Volatility forecast; GARCH-MIDAS (search for similar items in EconPapers)
JEL-codes: C22 C53 G11 G12 Q43 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:48:y:2022:i:c:s1544612322002689

DOI: 10.1016/j.frl.2022.103028

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