Abstract
This paper evaluates the association between crude oil prices and world food price indices, first within general space and time, and then within the combined time-frequency sphere. Monthly price data spanning from January 1990 to February 2016 were used for the analysis. The Johansen cointegration test conducted within the time domain confirmed the statistically significant cointegrated relationship between crude oil prices and the price indices of food and its sub-categories, such as dairy, cereals, vegetable oil, and sugar; however, frequency information was not accounted for. To incorporate both the time and frequency features of the data, we used a wavelet method that has shown that the world food prices, along with the prices of cereals, vegetable oils, and sugar, co-move with and are led by crude oil prices, results that remain relevant from the short-run policy perspective. The outcome of Toda–Yamamoto causality confirmed the spillover of crude oil price changes to the world food price index also in the long run. The paper ends with the policy implications of these results.
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