The Interplay between Oil and Food Commodity Prices: Has it Changed Over Time?

40 Pages Posted: 14 Oct 2019

See all articles by Gert Peersman

Gert Peersman

Ghent University - Department of Financial Economics

Sebastian K. Rüth

Heidelberg University

Wouter Van der Veken

Ghent University - Department of Economics

Date Written: 2019

Abstract

Using time-varying BVARs, we find that oil price increases caused by oil supply shocks did not affect food commodity prices before the start of the millennium, but had positive spillover effects in more recent periods. Likewise, shortfalls in global food commodity supply--resulting from bad harvests--have positive effects on crude oil prices since the early 2000s, in contrast to the preceding era. Remarkably, we also document greater spillover effects of both supply shocks on metals and minerals commodity prices in recent periods, as well as a stronger impact on the own price compared to earlier decades. This (simultaneous) time variation of commodity price dynamics cannot be explained by the biofuels revolution and is more likely the consequence of heightened informational frictions and information discovery in more globalized and financialized commodity markets.

Keywords: commodity markets, food prices, oil prices, spillovers

JEL Classification: E310, F300, G150, Q110, Q410

Suggested Citation

Peersman, Gert and Rüth, Sebastian K. and der Veken, Wouter Van, The Interplay between Oil and Food Commodity Prices: Has it Changed Over Time? (2019). CESifo Working Paper No. 7826. Available at SSRN: https://ssrn.com/abstract=3467959

Gert Peersman (Contact Author)

Ghent University - Department of Financial Economics ( email )

W. Wilsonplein 5D
Ghent, 9000
Belgium
+3292643514 (Phone)

HOME PAGE: www.feb.ugent.be/fineco/gert.html

Sebastian K. Rüth

Heidelberg University ( email )

Grabengasse 1
Heidelberg, 69117
Germany

Wouter Van Der Veken

Ghent University - Department of Economics ( email )

Belgium

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