Journal de l'économie mondiale

Cointegration and Causality of Energy and Grain Prices

Abstract

Daniel Armeanu

Oil, natural gas, and/or coal have historically been linked to grain markets because they are used as inputs for fertiliser production or transportation costs. The recent rise in energy prices in response to significant events such as the COVID-19 pandemic and the Russia-Ukraine conflict has refocused researchers' attention. The goal of this paper is to use time series models to assess any changes in the relationships between crude oil, natural gas and grain prices, which will contribute to a review of the fuel-food relationship. Several techniques (Zivot-Andrews and Clemente, Montaés, Reyes unit root tests, Johansen's cointegration test, Toda-Yamamoto time domain causality test with time dummy variables for structural breaks and Hatemi-J asymmetric causality test) are used to account for structural breaks and regime shifts data spanning the years January 1982 to September 2022 The main conclusion is that, in light of recent developments in the respective markets, the neutrality hypothesis remains valid.