Exploring the impacts of major events on the global oil and food markets

Guohua Ni, Man Teng, Zhenling Chen, Yunsong Wu, Wenjia He and Bin Su

Socio-Economic Planning Sciences, 2024, vol. 95, issue C

Abstract: To reveal the impact mechanism of major events on the fluctuation and spillover effects of the oil market to three food markets (i.e. corn, wheat, and soybean), a research framework integrating the event study method (ESM) and time-varying parameter vector autoregression-based Diebold–Yilmaz (TVP-VAR–DY) model is constructed. Further, the network for revealing the complex conduct path among them was investigated, and the empirical results indicated that (1) the positive and negative expected events (PEE, and NEE, respectively) comprising the first-order lag impacted the returns series in the oil market positively; (2) the impact of major events on the food market exerted a prolonged lag effect that varied with the different varieties grains; (3) the net spillover effect was mostly from oil to grain, and PEE significantly impacted the two spillover effects (from oil to corn and from oil to wheat), but its spillover effect from oil to soybean was insignificant; and (4) the impact of those events on the spillover effect of oil on wheat was transformed from insignificant to significant when PEE or NEE was controlled. These findings will facilitate the understanding of the internal link between the food and oil markets and provide a crucial reference for investors and policymakers.

Keywords: Oil market; Food market; Spillover effect; Event study method (ESM); TVP-VAR-DY approach (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:soceps:v:95:y:2024:i:c:s0038012124002180

DOI: 10.1016/j.seps.2024.102019

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