Food Price, Oil Price and Exchange Rate Dynamics in BRICS: Panel VAR and Dynamic Panel Threshold Analyses
Food price has continued to increase significantly and the oil price continues to be volatile in the midst of a downward trend in the external value of most currencies. This study purposes to shed light on the dynamic interaction between oil prices, exchange rates and food prices in BRICS and investigate the direction of the causality. The study also aims at determining the existence of an oil price threshold on the oil price and food price nexus. In order to achieve the objectives of the study, panel VAR and dynamic threshold models were employed using monthly data from January 2003 to March 2022. The findings show that oil prices and exchange rate shocks exert a significant influence on food prices. Our findings also show that oil prices and exchange rates are significant sources of variations in food prices. The findings confirm the existence of unidirectional causality from oil price to food price, and from exchange rate to food price. This study also establishes the existence of an oil price threshold on the nexus between oil price and food price. It can be recommended that the implementation of sound macroeconomic policies in the oil sectors keep the domestic oil price below the threshold level.
Abdel, H. A., & Arshad, F. M. (2008). The impact of petroleum prices on vegetable oils prices: evidence from cointegration tests. In International Borneo Business Conference on Global Changes, Malaysia (pp. 15-17).
Abdlaziz, R. A., Rahim, K. A., & Adamu, P. (2016). Oil and food prices co-integration nexus for Indonesia: A non-linear autoregressive distributed lag analysis. International Journal of Energy Economics and Policy, 6(1), 82-87.
Abrigo, M. R., & Love, I. (2016). Estimation of panel vector autoregression in Stata. The Stata Journal, 16(3), 778-804.
Ahmed, R., Qaiser, I., & Yaseen, M. R. (2016). Nexus between exchange rate volatility and oil price fluctuations: Evidence from Pakistan. Pakistan journal of Commerce and Social Sciences 2016, 10(1), 122-148.
Alghalith, M. (2010). The interaction between food prices and oil prices. Energy Economics, 32(6), 1520-1522.
Almalki, A. M., Hassan, M. U., & Amin, M. F. B. (2022). The asymmetric relationship between structural oil shocks and food prices: evidence from Saudi Arabia. Applied Economics, 1-18.
Alom, F., Ward, B. D., & Hu, B. (2013). Macroeconomic effects of world oil and food price shocks in A sia and Pacific economies: application of SVAR models. OPEC Energy Review, 37(3), 327-372.
Avalos, F. (2014). Do oil prices drive food prices? The tale of a structural break. Journal of International Money and Finance, 42, 253-271.
Anand, R., Ding, D., & Tulin, M. V. (2014). Food inflation in India: The role for monetary policy. International Monetary Fund.
Bénassy-Quéré, A., Mignon, V., & Penot, A. (2007). China and the relationship between the oil price and the dollar. Energy policy, 35(11), 5795-5805.
Buetzer, S., Habib, M. M., & Stracca, L. (2016). Global exchange rate configurations: Do oil shocksmatter? IMF Economic Review, 64(3), 443-470.
Coudert, V., Mignon, V., & Penot, A. (2007). Oil price and the dollar. Energy Studies Review, 15(2).
Dole, M. S. (2022). Russia-Ukraine war: Impact on Indian Economy. IJNRD-International Journal of Novel Research and Development (IJNRD), 7(4), 303-309.
Esmaeili, A., & Shokoohi, Z. (2011). Assessing the effect of oil price on world food prices: Application of principal component analysis. Energy Policy, 39(2), 1022-1025.
Filis, G., Degiannakis, S., & Floros, C. (2011). Dynamic correlation between stock market and oil prices: The case of oil-importing and oil-exporting countries. International review of financial analysis, 20(3), 152-164.
Fowowe, B. (2016). Do oil prices drive agricultural commodity prices? Evidence from South Africa. Energy, 104, 149-157.
Gogoi, A. B. H. I. S. H. E. K. (2014). Investigating the long run relationship between crude oil and food commodity prices (Doctoral dissertation, MSc thesis). Department of Economics, University of Nottingham, Nottingham).
Hanson, K., Robinson, S., & Schluter, G. (1991). Sectoral effects of a world oil-price shock: economy-wide linkages to the agricultural sector. Staff report (No. PB-92-128610/XAB; AGES-91-56). Economic Research Service, Washington, DC (United States). Agriculture and Rural Economy Div..
Holtz-Eakin, D., Newey, W., & Rosen, H. S. (1988). Estimating vector autoregressions with panel data. Econometrica: Journal of the econometric society, 1371-1395.
Holtemöller, O., & Mallick, S. (2016). Global food prices and monetary policy in an emerging market economy: The case of India. Journal of Asian Economics, 46, 56-70.
Ijeoma, F., Okogbe, B., & Orimoloye, S. (2016, August). Challenges of Drilling Deep Set Surface Casing Strings in Orogho, Ovhor and Oben Fields. In SPE Nigeria Annual International Conference and Exhibition. OnePetro.
Javed, F., Aslam, M., Rashid, N., Shamair, Z., Khan, A. L., Yasin, M., ... & Bazmi, A. A. (2019). Microalgae-based biofuels, resource recovery and wastewater treatment: a pathway towards sustainable biorefinery. Fuel, 255, 115826.
Jiranyakul, K. (2015). Oil price volatility and real effective exchange rate: the case of Thailand. International Journal of Energy Economics and Policy, 5(2), 574-579.
Krätschell, K., & Schmidt, T. (2017). Long-run waves or short-run fluctuations–what establishes the correlation between oil and food prices?. Applied Economics, 49(54), 5535-5546.
Lambert, D. K., & Miljkovic, D. (2010). The sources of variability in US food prices. Journal of Policy Modeling, 32(2), 210-222.
Li, Y., & Guo, J. (2022). The asymmetric impacts of oil price and shocks on inflation in BRICS: a multiple threshold nonlinear ARDL model. Applied Economics, 54(12), 1377-1395.
Meyer, D. F., Sanusi, K. A., & Hassan, A. (2018). Analysis of the asymmetric impacts of oil prices on food prices in oil-exporting, developing countries. Journal of International Studies, 11(3).
Nasir, M. A., Naidoo, L., Shahbaz, M., & Amoo, N. (2018). Implications of oil prices shocks for the major emerging economies: A comparative analysis of BRICS. Energy Economics, 76, 76-88.
Nazlioglu, S. (2011). World oil and agricultural commodity prices: Evidence from nonlinear causality. Energy policy, 39(5), 2935-2943.
Nazlioglu, S., & Soytas, U. (2012). Oil price, agricultural commodity prices, and the dollar: A panel cointegration and causality analysis. Energy Economics, 34(4), 1098-1104.
Reboredo, J. C. (2012). Modelling oil price and exchange rate co-movements. Journal of Policy Modeling, 34(3), 419-440.
Rezitis, A. N. (2015). The relationship between agricultural commodity prices, crude oil prices and US dollar exchange rates: A panel VAR approach and causality analysis. International Review of Applied Economics, 29(3), 403-434.
Roman, Monika, Aleksandra Górecka, and Joanna Domagała. "The linkages between crude oil and food prices." Energies 13.24 (2020): 6545.
Sanusi, K. A., & Kapingura, F. M. (2022). On the relationship between oil price, exchange rate and stock market performance in South Africa: Further evidence from time-varying and regime switching approaches. Cogent Economics & Finance, 10(1), 2106629.
Sanusi, K. A. (2020). Oil prices asymmetric and exchange rate volatility: Case of oil-exporting emerging countries. Journal of International Studies, 13(4), 101-109.
Turhan, I., Hacihasanoglu, E., & Soytas, U. (2013). Oil prices and emerging market exchange rates. Emerging Markets Finance and Trade, 49(sup1), 21-36.
Youssef, M., & Mokni, K. (2021). On the Nonlinear Impact of Oil Price Shocks on the World Food Prices Under Different Markets Conditions. International Economic Journal, 35(1), 73-95.
Yu, L., Wang, S., & Lai, K. K. (2008). Forecasting crude oil price with an EMD-based neural network ensemble learning paradigm. Energy economics, 30(5), 2623-2635.
Yu, T. H. E., Bessler, D. A., & Fuller, S. W. (2006). Cointegration and causality analysis of world vegetable oil and crude oil prices (No. 379-2016-21814).
Zhang, Q., & Reed, M. R. (2008). Examining the impact of the world crude oil price on China's agricultural commodity prices: the case of corn, soybean, and pork (No. 1368-2016-108438).
Zhang, Y. J., & Wei, Y. M. (2010). The crude oil market and the gold market: Evidence for cointegration, causality and price discovery. Resources Policy, 35(3), 168-177.
Zmami, M., & Ben-Salha, O. (2019). Does oil price drive world food prices? Evidence from linear and nonlinear ARDL modeling. Economies, 7(1), 12.
Copyright (c) 2022 Zandri Dickason, Kazeem Abimbola Sanusi
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
The author fully assumes the content originality and the holograph signature makes him responsible in case of trial.