The Dynamic Relationship between Oil and Wheat Markets

Mireille Al-Ayoubi, Mohamed Chikhi and Michel Terraza

Applied Economics and Finance, 2014, vol. 1, issue 1, 116-126

Abstract: The aim of this paper is to analyze the cross-market interactions between crude oil prices and wheat prices. We investigate the dynamic relationship between world oil market and wheat market in assumption that the increase of volatility in wheat price is caused by the exogenous crude oil price. To this end, Granger Causality test and kernel Granger Causality test are applied to daily crude oil and wheat prices from January 2000 to June 2013. The linear causality analysis indicates that the oil prices and the wheat prices do not influence each other; this result supports the neutrality hypothesis of Granger causality. In Contrast, the non linear causality analysis proves the existence of non linear feedbacks between oil and wheat markets. These findings provide information for better understanding the recent dynamics of wheat market. Thus, the interdependence between wheat and oil markets is mainly explained by production cost, transportation cost, Biofuel markets and speculation.

Keywords: wheat market; oil market; Granger Causality; Kernel Granger Causality (search for similar items in EconPapers)
JEL-codes: A00 Z0 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:rfa:aefjnl:v:1:y:2014:i:1:p:116-126

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