Abstract
This paper aims to indicate the linkages between crude oil prices and selected food price indexes (dairy, meat, oils, cereals, and sugar) and provide an empirical specification of the direction of the impact. This paper reviews the fuel–food price linkage models with consideration to the time series literature. This study adopts several methods, namely the Augmented Dickey–Fuller test, Granger causality test, the cointegration test, the vector autoregression model, and the vector error correction model, for studying the price transmission among the crude oil and five selected food groups. The data series covers the period between January 1990 and September 2020. The empirical results from the paper indicate that there are long-term relationships between crude oil and meat prices. The linkage of crude oil prices occurred with food, cereal, and oil prices in the short term. Furthermore, the linkages between the analyzed variables increased in 2006–2020.
Highlights
The role of crude oil in the worldwide economy [1,2,3] is considered essential as it is one of the most crucial sources of energy, which, in turn, constitutes an essence of the modern global economy.In the past, oil occupied most of the energy area [4], and Rahmas [5] suggested that the oil dominion would extend over the twenty-first century, too.There were some significant spikes in the price of oil
The exceptions are the results for meat and crude oil in 2006–2020
Theisresults indicate crude priceand doesonly not have a short-term impact on food, dairy, cereal, The results indicate that crude oil price does not have a short-term impact oil, and sugar price volatility in the second subperiod; food, cereal, andon oilfood, pricesdairy, have acereal, oil, and sugarshort-term price volatility second subperiod; food, cereal, and connection oil prices have favorable impact in on the crude oil price volatility
Summary
The role of crude oil in the worldwide economy [1,2,3] is considered essential as it is one of the most crucial sources of energy, which, in turn, constitutes an essence of the modern global economy. There were some significant spikes in the price of oil. The first was noticed in May 1974, followed by the Yom-Kippur War in 1973, when imported crude oil’s actual price per barrel jumped to 69.64 USD, followed by January 1981, just after the Iranian Revolution in 1979, with the price per barrel hitting. The central peak during the considered period coincided with the time of the world’s financial crisis in 2007 and 2008. In March 2012, another peak was observed when real prices increased up to 126.10 USD per barrel (Figure 1)
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