Time-frequency contained co-movement of crude oil and world food prices: A wavelet-based analysis |
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| Affiliation: | 1. Indian Institute of Management Lucknow, India;2. Indian Institute of Management Raipur, India;1. Centre de Recerca en Economia i Desenvolupament Agroalimentaris (CREDA)-UPC-IRTA, Parc Mediterrani de la Tecnologia, Edifici ESAB, C/Esteve Terrades 8, 08860 Castelldefels, Spain;2. Department of Agricultural and Consumer Economics - University of Illinois;1. Department of Finance and Accounting, University of Tunis El Manar, Tunis, Tunisia;2. Department of Economics and Finance, College of Economics and Political Science, Sultan Qaboos University, Muscat, Oman;3. Montpellier Business School, Montpellier, France;4. Faculty of Applied Economics, IBS Hyderabad, IFHE University Hyderabad, Hyderabad, India;5. USEK Business School, Holy Spirit University of Kaslik, PO BOX 446, Jounieh, Lebanon;1. College of Business Administration, Northern Border University, Saudi Arabia;2. University of Sousse, Tunisia;3. Economic Research Forum, Egypt;4. College of Business, University of Jeddah, Saudi Arabia;5. University of Carthage, Tunisia;6. College of Business Administration, King Saud University, Saudi Arabia |
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| 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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