Abstract
Agricultural prices variation analysis is essential for the formulation of public policies and business decisions. Considering the strategic importance of olive oil for producers and consumers alike, as well as its potential economic and social benefits, this study aims to quantify the volatility of olive oil prices. The models are estimated using monthly data of olive oil prices (from January 1980 to February 2017) that was collected from IMF statistics. ARCH and GARCH models were used to estimate price volatility. Our results for olive oil show that volatility clashes of prices does not last for a long period of time, and thus olive oil is an interesting culture for new producer markets, as it is not a product that suffers from a huge volatility in price in the international market, mitigating the risk to rural producers and encouraging new local businesses. This study is limited by the data analysed and the methodology used. Further research should include more data and other statistical approaches (e.g., econometric panel data that considers different countries and several explanatory variables for price volatility).
Highlights
Apart from having an economic importance for producers and being a food item for consumers, olive oil production is tied to the roots of civilization
By carrying out a detailed analysis across the Web of Science database (WOS) related to the expression “Volatility Autoregressive Conditional Heteroscedasticy Model (ARCH),” it is possible to prove the scientific relevance of this topic and the importance of this line of research, which has seen a significant increase over the years, with more than 1034 scientific papers published on the subject
This is the final purpose of this paper: To analyse the volatility of olive oil prices, in order to come to conclusions about their potential utilisation for the development of low income rural areas
Summary
Apart from having an economic importance for producers and being a food item for consumers, olive oil production is tied to the roots of civilization. Its history starts in the Mediterranean shores of Palestine and Syria, from where its production expanded to Turkey, via Cyprus and on to Egypt via Crete. It should be said, that its importance is not merely historical, but rather current, as it is one of the most consumed foods in the world. The increasing importance of “non-traditional” olive oil producers, such as Argentina, Australia, or South Africa, is due to the growth of olive oil world consumption, due to it being a key element of the Mediterranean diet and its health benefits (Gázquez-Abad and Sánches-Pérez, 2009). Other Latin American Countries, such as Chile, Argentina, and Uruguay, already have a developed olive oil industry and have even begun to export olive oil (Torres and Maestri, 2006; García-González et al, 2010; Gámbaro et al, 2011; Romero and Aparicio, 2010; Wrege et al, 2015)
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