Assessing the Causality Relationship between the Geopolitical Risk Index and the Agricultural Commodity Markets

Joseph Micallef, Simon Grima (), Jonathan Spiteri and Ramona Rupeika-Apoga
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Joseph Micallef: Department of Insurance and Risk Management, Faculty of Economics Management and Accountancy, University of Malta, MSD 2080 Msida, Malta
Simon Grima: Department of Insurance and Risk Management, Faculty of Economics Management and Accountancy, University of Malta, MSD 2080 Msida, Malta
Jonathan Spiteri: Department of Insurance and Risk Management, Faculty of Economics Management and Accountancy, University of Malta, MSD 2080 Msida, Malta
Ramona Rupeika-Apoga: Faculty of Business, Management and Economics, University of Latvia, LV-1586 Riga, Latvia

Risks, 2023, vol. 11, issue 5, 1-15

Abstract: The aim of this study was to investigate the Granger causality between geopolitical risk (GPR) sub-indices in order to examine the implications of geopolitical risk on ten agricultural commodities classified as softs or grains. The Granger causality test was used to determine the causal relationship between the daily GPR sub-indices and the future prices of ten essential agricultural commodities from 31 March 2000 to 31 March 2022. We discovered that the GPR Threat and Act sub-indices Granger-caused changes in the wheat and oat commodity prices. These findings were also connected to the ongoing Russian–Ukrainian conflict, which has had an impact on agricultural commodity prices because both countries are major agricultural producers. The empirical results also showed how the GPR Threat sub-index Granger-affected the future prices of soybean oil, coffee, wheat, and oats. On the other hand, the GPR Act sub-index only Granger-affected the future price of oats. The findings of this study should provide useful information to both policymakers and governments to help them acknowledge the importance of geopolitical risk when setting their national policies related to food security.

Keywords: geopolitical risk; geopolitical risk index; agricultural commodity markets; causality (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:gam:jrisks:v:11:y:2023:i:5:p:84-:d:1137292

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