Time-varying dependence structure between oil and agricultural commodity markets: A dependence-switching CoVaR copula approach

Satish Kumar, Aviral Kumar Tiwari, Ibrahim Dolapo Raheem, Erik Hille

Research output: Contribution to journalArticlepeer-review

Abstract

We examine the energy-food nexus using the dependence-switching copula model. Specifically, we look at the dependence for four distinct market states, such as, increasing oil-increasing commodity, declining oil-declining commodity, increasing oil-declining commodity, as well as declining oil-increasing commodity markets. Our results support the argument that the crash of oil markets and agricultural commodities happen at the same time, especially during crisis period. However, the same is not true during times of normal economic conditions, implying that investors cannot make excess profits in both agricultural and oil markets at once. Furthermore, our analysis suggests that the return chasing effect dominates for all commodities on maximum occasions. The CoVaR and.CoVaR results indicate important risk spillover from oil to agricultural markets, especially around the financial crisis.

Original languageEnglish
Article number102049
Number of pages15
JournalResources Policy
Volume72
Early online date12 Mar 2021
DOIs
Publication statusPublished - Aug 2021
Externally publishedYes

Keywords

  • Agricultural commodities
  • CoVaR
  • Dependence-switching copula
  • Oil
  • Tail dependence

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