The Relationship between Oil and Agricultural Commodity Prices: A Quantile Causality Approach

Mehmet Balcilar, Shinhye Chang (), Rangan Gupta, Vanessa Kasongo () and Clement Kyei
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Shinhye Chang: Department of Economics, University of Pretoria
Vanessa Kasongo: Department of Economics, University of Pretoria

No 201468, Working Papers from University of Pretoria, Department of Economics

Abstract: This paper investigates causality between oil prices and the prices of agricultural commodities in South Africa. We use daily data covering the period April 19, 2005 to July 31, 2014 for oil prices and the prices of soya beans, wheat, sunflower and corn. The test for Granger causality in conditional quantiles as proposed by Jeong et al., (2012) was employed. Our findings show that the effect of oil prices on agricultural commodity prices varies across the different quantiles of the conditional distribution. The impact on the tails is lower compared to the rest of the distribution. However, the highest impact is not necessarily at the mean. We show that due to nonlinear dependence between oil prices and agricultural commodity prices, regular Granger causality provides misleading results and also fails to characterize the relationship over the entire conditional joint distribution of the variables.

Keywords: Granger causality; South Africa; Nonparametric test; Quantile causality; Commodity prices (search for similar items in EconPapers)
JEL-codes: Q02 Q43 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2014-11
New Economics Papers: this item is included in nep-afr, nep-agr and nep-ene
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:201468

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