Co-integration of Oil and Commodity Prices: A Comprehensive ApproachAbstract

Mohcine Bakhat () and Klaas WŸrzburg ()
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Mohcine Bakhat: Economics for Energy and Rede (Universidade de Vigo)
Klaas WŸrzburg: Economics for Energy and Rede (Universidade de Vigo)

Working Papers from Economics for Energy

Abstract: Past research has mainly applied linear cointegration analysis to study the relationship of crude oil prices with the prices of other commodities. However, recent methodological innovations in cointegration analysis allow for a more thorough analysis of the co-movement of commodity prices and detect asymmetric and thresholds co-movements. Following Enders and Siklos (2001) and Hansen and Seo (2002), we apply threshold cointegration analysis, detecting co-movements that earlier studies based on linear cointegration analysis could not detect. We find that adjustments to positive and negative deviations from the long-run equilibrium are asymmetric for copper, food and agricultural raw materials in the short-run. Moreover, the adjustments for aluminum and nickel are symmetric. The price Granger causalities behave as expected for metals and agricultural raw material prices. Food prices, however, behave differently. In sum, the results of this paper underscore the importance of consistently testing nonlinear cointegration and point out the complex interactions that take place between the markets of oil and other commodities.

Keywords: linear; threshold; metals; raw materials; agriculture (search for similar items in EconPapers)
JEL-codes: Q11 Q21 Q41 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2013-02
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Citations: View citations in EconPapers (1)

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