The effect of global oil price shocks on China's agricultural commodities

Abstract

This paper studied the effect of global oil price shocks on agricultural commodities in China, including strong wheat, corn, soybean, bean pulp, cotton and natural rubber. We regarded oil price volatility process as a combination of continuous process and jump process. We not only separated oil price shocks into positive and negative categories to identify different effects on agricultural commodities in continuous process, but also investigated how jump behavior influenced these agricultural commodities. We found that the oil price was characterized by volatility clustering and jump behavior. At the same time, oil price shocks had different effects on agricultural commodities. In addition, the shocks on most agricultural commodities were asymmetric. Only natural rubber was under influence of the jump intensity of the oil price, in contrast to strong wheat, corn, soybean, bean pulp and cotton.