Asymmetric risk spillovers between oil and agricultural commodities

• Published in: Energy policy Vol. 118; pp. 182 - 198
• Main Authors: Shahzad, Syed Jawad Hussain, Hernandez, Jose Arreola, Al-Yahyaee, Khamis Hamed, Jammazi, Rania
• Format: Journal Article
• Language: English
• Published: Kidlington Elsevier Ltd 01.07.2018; Elsevier Science Ltd; Elsevier
• Subjects: Agricultural commodities; Agricultural economics; Agriculture; Agronomy; Asymmetry; Business administration; Commodities; Commodity brokers; Commodity prices; Corn; CoVaR; Crude oil; Crude oil prices; Dependence; Economic factors; Economics; education; Energy policy; farms; Global economy; Health care expenditures; Health education; Humanities and Social Sciences; laws and regulations; Legislation; markets; Oil prices; oils; Petroleum; Policy making; Prices; Pricing; Rice; Risk; Risk spillovers; Social costs; Soya beans; Soybeans; Spillover effect; Static and time-varying copulas; Symmetry; Wheat; Oil prices; C5; CoVaR; Agricultural commodities; G1; Static and time-varying copulas; G14; Risk spillovers
• ISSN: 0301-4215; 1873-6777
• DOI: 10.1016/j.enpol.2018.03.074

Increase in agricultural commodities’ prices not only increases economic and social costs, it may also affect health, education and family ties. The dependence and risk transmission between oil prices and the price of agricultural commodities is subject to possible symmetric or asymmetric changes due to legislation in the farm sector in recent times. The objective of this study is to understand the extent to which oil as a global economic factor influences the price behavior of agricultural commodities such as wheat, maize, soybeans, and rice under adverse and prosperous market scenarios. We find evidence of symmetry in the tail dependence between variables, and of asymmetry in the spillovers from oil to agricultural commodities that intensify during financial turmoil. Policymakers and traders of agricultural commodities may benefit by considering the identified asymmetries in co-movements and risk spillovers. •Static and time-varying copulas, and upside and downside risk spillovers.•Conditional Value-at-Risk (CoVaR) and delta conditional Value-at-Risk (delta CoVaR) modeling.•Dependence structure between oil and agricultural commodities.•Evidence of asymmetric tail dependence between oil and all agricultural commodities.•Evidence of bilateral and asymmetric upside and downside spillovers from oil to agricultural commodities.