A Study on the Causal Relationship between Spot Price and Futures Price of Crude Oil and Agricultural Products

Dong Hoon Shin; Seon Hyeon Kim

doi:10.31686/ijier.vol8.iss5.2345

Authors

Dong Hoon Shin

Inha University
Seon Hyeon Kim

Korea Universe, Seoul, South Korea

DOI:

https://doi.org/10.31686/ijier.vol8.iss5.2345

Keywords:

Granger Causality, Toda-Yamamoto causality test, agricultural derivatives, agricultural products, oil price

Abstract

This paper studies the relationship between the agricultural, energy, and derivatives markets. This study empirically analyzes how the results of previous studies on the Granger causality between oil price and the spot price of agricultural products appear in the futures market by using the Toda and Yamamoto (1995)’ causality test. There are two main findings. First, 7 bidirectional causalities and 27 causalities between oil and 6 agricultural products are found, providing strong evidence of a causal relationship. Second, causality is found between oil prices and grain and oilseed type agricultural products, and the spot price of oil has relatively more causalities on agricultural product prices than the futures price of oil. Lastly, testing each period shows that a financial crisis can strengthen the relationship between the agriculture markets and the energy markets

Author Biographies

Dong Hoon Shin, Inha University

Associate Professor in the Department of Global Finance and Banking
Seon Hyeon Kim, Korea Universe, Seoul, South Korea

Department of Business Administration,

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