Revealing asymmetric spillover effects in hazelnut, gasoline, and exchange rate markets in Turkey: The VECM-BEKK-MGARCH approach

Emine Askan,Abdulbaki Bilgic,Faruk Urak

doi:10.2298/pan190509005a

Abstract

The study used the VECM-BEKK-MGARCH method to model the volatility transmission between the markets of gasoline, exchange rates, and the hazelnut market for the period of 21.07.2005-20.3.2018. The suitability of the VECM-BEKK-MGARCH method was confirmed by statistical testing. The changes in hazelnut prices were not affected by the changes in the prices or final values in the other two sectors (Granger causality). Moreover, the Granger causality tests revealed that, while the change in the gasoline market was not affected by the other two markets, the change in the exchange rates market was affected by the other two markets. Furthermore, especially the volatilities (longterm uncertainties) of the markets were affected by both their own short- and long-term volatilities and other sectors? short- and long-term volatilities. It was shown that the long-term swings in these three markets were affected by the cross-interaction in the markets. Additionally, as opposed to the case in the positive news, it was observed that pieces of negative news affected the markets.

Highlights

Turkey produces on average 550,000 tons of hazelnut per year, which corresponds to approximately 70-75% of the global production
When two lags were used in the model, we found that there was only a co–integration vector at the 6% significance level between the three markets (Table 1). When this co–integration vector is taken into consideration, a unitary increase in the real price of gasoline and the closing value of the exchange rate leads to a decrease of about 10 Turkish Lira (TL) in the long–term shelled hazelnut real price level
Agricultural commodity markets were exposed to relatively high price volatility especially in 2006 when biofuels started to appear in the markets

Summary

Introduction

Turkey produces on average 550,000 tons of hazelnut per year, which corresponds to approximately 70-75% of the global production Hazelnut prices have been volatile for the last few years due to extreme weather conditions in the country. In 2017, the government intervened in the market by buying hazelnuts against price fluctuations that would harm producers. This was the first intervention of the government by authorizing the Turkish Grain Board (TGB) in the market within eight years. TGB was a regular buyer of hazelnuts between 2006 and 2009. It has created a backdrop for farmers who will either sell their products to the state or hope to sell their products at higher prices in the market (de Wit 2014; Şişman 2017)

Methods

Results

Conclusion