Open AccessThe Effect of Oil Price on China’s Grain Prices: a VAR model
Author(s) -
Jingye Li
Publication year - 2021
Publication title -
advances in management and applied economics
Language(s) - English
Resource type - Journals
ISSN - 1792-7544
DOI - 10.47260/amae/1115
Subject(s) - economics , vector autoregression , volatility (finance) , crude oil , agricultural economics , china , variance decomposition of forecast errors , food prices , agriculture , econometrics , monetary economics , food security , geography , archaeology , petroleum engineering , engineering
In recent years, the simultaneous trend of crude oil prices and agricultural prices has gained numerous attention of policy makers and market participants. This paper uses a vector autoregression model to examine the impact of the international crude oil prices on China’s grain prices including wheat, maize, soybean and rice during the period from June 2004 to December 2018. Empirical results indicates that international crude oil prices have a positive and significant impact on China’s grain prices. The response of grain prices would gradually decline to zero after reaching its maximum. Among these grain prices, the response of maize and soybean prices to crude oil prices is stronger than the rice and wheat prices. The error variance decomposition results show that most of the volatility in all price variables can be explained by own shocks, even though the fluctuation of grain prices are all affected by crude oil prices.JEL classification numbers: O13Keywords: Oil prices, Grain prices, VAR, Variance decomposition.