Keywords: price volatility, global food, impulse response, wheat prices, corn prices, crude oil prices, energy markets: spillover effects, biofuels, market shocks, fertilisers, food commodity markets
Wheat and corn prices and energy markets: spillover effects
This paper investigates volatility spillover across crude oil market and wheat and corn markets. The corn commodity is taken here to assess the impact of change in demand for biofuel on wheat market. Results of multivariate GARCH model show evidence of corn price volatility transmission to wheat market. Our results indicate that while shocks (unexpected news) in crude oil market have significant impact on volatility in wheat and corn markets, the effect of crude oil price changes on wheat and corn prices is insignificant. The impulse response analysis also indicates shocks in oil markets have permanent effect on wheat and corn price changes. This reveals the influence of future crude oil markets on global food price volatility. Also indicated that fertilisers markets influenced by own–shocks and shocks in oil markets. Thus, shocks in crude oil markets have direct and indirect effects (via fertilisers markets) on food commodity markets.