Volatility spillovers between energy and agriculture markets during the ongoing food & energy crisis: Does uncertainty from the Russo-Ukrainian conflict matter?

Food and energy are the backbone of the global economy. The world is unfortunately witnessing the food and energy crisis caused by the ongoing Russo-Ukrainian conflict. However, the effects of the uncertainty related to the conflict on volatility spillovers between energy and agricultural commodity markets during this crisis have largely been neglected. As such, this study aims to fill this gap by using data from Google Trends to measure uncertainty related to the conflict. Our analysis utilizes the TVP-VAR connectedness approach to measure volatility spillover between energy and agriculture markets during the ongoing crisis. We find that the uncertainty related to the ongoing conflict significantly increases the spillovers between energy and agricultural markets. However, the effect of the uncertainty on the spillovers is mitigated by an increase in available information related to geopolitical risk, which is not documented in previous studies. Furthermore, the results also reveal that the volatility spillovers increase significantly around events related to sanctions on Russian energy imposed by the G-7 countries and the European Union.