What Drives Commodity Prices More: Oil Demand or Supply Shocks?

Maria Erlinda M. Mutuc, Suwen Pan and Darren Hudson

No 61070, 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado from Agricultural and Applied Economics Association

Abstract: This paper shows that the response of agricultural commodity prices in the U.S. related to fluctuations in oil prices in the international market may differ greatly depending on whether the increase is driven by demand or supply shocks in the crude oil market. In the long-run, around 2-7 percent of the variability in grains, oilseeds, and cotton prices can be attributed to shocks to aggregate demand for industrial commodities while none can be traced to oil supply shocks. This paper improves on the lack of economic structure in VAR models employed so far, and on the issue of short datasets, contributes to the nascent empirical evidence, and identifies the transmission of different types of oil price shocks to movements in agricultural prices in a SVAR framework using monthly data from 1976 to 2008.

Keywords: Agricultural and Food Policy; Crop Production/Industries; Demand and Price Analysis (search for similar items in EconPapers)
Pages: 2
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea10:61070

DOI: 10.22004/ag.econ.61070

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