Crude Oil and Agricultural Futures: An Analysis of Correlation Dynamics

Annastiina Silvennoinen and Susan Thorp

No 109, NCER Working Paper Series from National Centre for Econometric Research

Abstract: Correlations between oil and agricultural commodities have varied over previous decades, impacted by renewable fuels policy and turbulent economic conditions. We estimate smooth transition conditional correlation models for 12 agricultural commodities and WTI crude oil. While a structural change in correlations occurred concurrently with the introduction of biofuel policy, oil and food price levels are also key influences. High correlation between biofuel feedstocks and oil is more likely to occur when food and oil price levels are high. Correlation with oil returns is strong for biofuel feedstocks, unlike with other agricultural futures, suggesting limited contagion from energy to food markets.

Keywords: Smooth transition conditional correlation; Structural breaks; Return comovement (search for similar items in EconPapers)
Date: 2015-10-29
New Economics Papers: this item is included in nep-agr and nep-ene
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Journal Article: Crude Oil and Agricultural Futures: An Analysis of Correlation Dynamics (2016)
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