Red Meat Price Volatility and Its Relationship with Crude Oil and Exchange Rates in Turkey with the Approach of GARCH (p, q) Model

Melek Akay

doi:10.29133/yyutbd.984277

Abstract

Turkey's agricultural commodity prices are volatile while they have steadily increased over time. A substantial amount of research has been done on the variations in these prices by looking at other commodities like energy. As a result, the connections between agricultural and energy markets have been widely explored. There is a great concern about how red meat prices in Turkey are getting increasingly fluctuating. On the other hand, we may assume that ups and downs movement in the prices of crude oil and exchange rates are connected to veal and lamb carcass prices and that volatility is transmitted to those meat prices. This study uses the generalize all period unconstraint volatility model, which generalizes the GARCH (p, q) model, to examine the veal and lamb prices volatilities in Turkey and their relationship with crude oil as well as exchange rates (data are weekly covering from May 2006 to February 2017). According to findings, red meat prices have been volatile over the previous decade, notably between 2009 and 2012. Furthermore, crude oil prices have an important impact on the prices of veal and lamb and their prior times statistically. Also exchange rates at t-2 and t-4 time have an impact on lamb prices but none at all on veal prices. Subsequently, red meat price rise and volatility are becoming an important problem for Turkey, and the policies made in this area need to be evaluated.

Highlights

Livestock is an essential sector for consumers and producers in Turkey since it offers a wellbalanced diet and income source
Red meat price rise and volatility are becoming an important problem for Turkey, and the policies made in this area need to be evaluated
The data is collected on a daily basis, but it is transformed to a week by averaging the values of each week from Monday to Friday. These red meat prices data come from the Turkish Commodity Exchanges Information Systems (TOBB), while exchange rates and crude oil prices come from the Turkish Central Bank (TMB) and the Republic of Turkey Energy Market Regulatory (EPDK), respectively

Summary

Introduction

Livestock is an essential sector for consumers and producers in Turkey since it offers a wellbalanced diet and income source. One of the main objectives of the policies, those of the central government, is to minimize and stabilize the continuously rising costs of red meat, which have grown exorbitant in recent years (USDA, 2016). Livestock is regarded as one of Turkey's most crucial sub-sectors. Red meat prices have risen steadily in recent years with fluctuation, and they have trebled in the previous decade (TUIK, 2017). Agricultural commodity price rises and volatility, according to Hayenga and Dipietre (1982), have an impact on all market sectors. The feasibility of red meat prices is to be a heated issue among consumers, producers, and politicians, as predicted

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