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Assessing the Causality Relationship between the Geopolitical Risk Index and the Agricultural Commodity Markets

Author

Listed:
  • Joseph Micallef

    (Department of Insurance and Risk Management, Faculty of Economics Management and Accountancy, University of Malta, MSD 2080 Msida, Malta)

  • Simon Grima

    (Department of Insurance and Risk Management, Faculty of Economics Management and Accountancy, University of Malta, MSD 2080 Msida, Malta
    Faculty of Business, Management and Economics, University of Latvia, LV-1586 Riga, Latvia)

  • Jonathan Spiteri

    (Department of Insurance and Risk Management, Faculty of Economics Management and Accountancy, University of Malta, MSD 2080 Msida, Malta)

  • Ramona Rupeika-Apoga

    (Faculty of Business, Management and Economics, University of Latvia, LV-1586 Riga, Latvia)

Abstract

The aim of this study was to investigate the Granger causality between geopolitical risk (GPR) sub-indices in order to examine the implications of geopolitical risk on ten agricultural commodities classified as softs or grains. The Granger causality test was used to determine the causal relationship between the daily GPR sub-indices and the future prices of ten essential agricultural commodities from 31 March 2000 to 31 March 2022. We discovered that the GPR Threat and Act sub-indices Granger-caused changes in the wheat and oat commodity prices. These findings were also connected to the ongoing Russian–Ukrainian conflict, which has had an impact on agricultural commodity prices because both countries are major agricultural producers. The empirical results also showed how the GPR Threat sub-index Granger-affected the future prices of soybean oil, coffee, wheat, and oats. On the other hand, the GPR Act sub-index only Granger-affected the future price of oats. The findings of this study should provide useful information to both policymakers and governments to help them acknowledge the importance of geopolitical risk when setting their national policies related to food security.

Suggested Citation

  • Joseph Micallef & Simon Grima & Jonathan Spiteri & Ramona Rupeika-Apoga, 2023. "Assessing the Causality Relationship between the Geopolitical Risk Index and the Agricultural Commodity Markets," Risks, MDPI, vol. 11(5), pages 1-15, April.
    • Handle: RePEc:gam:jrisks:v:11:y:2023:i:5:p:84-:d:1137292
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    References listed on IDEAS

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    1. Dario Caldara & Matteo Iacoviello, 2022. "Measuring Geopolitical Risk," American Economic Review, American Economic Association, vol. 112(4), pages 1194-1225, April.
    2. Abdel-Latif, Hany & El-Gamal, Mahmoud, 2020. "Financial liquidity, geopolitics, and oil prices," Energy Economics, Elsevier, vol. 87(C).
    3. Juncal Cunado & Rangan Gupta & Chi Keung Marco Lau & Xin Sheng, 2020. "Time-Varying Impact of Geopolitical Risks on Oil Prices," Defence and Peace Economics, Taylor & Francis Journals, vol. 31(6), pages 692-706, August.
    4. Hany Abdel-Latif & Mahmoud El-Gamal, 2019. "Antecedents of war: the geopolitics of low oil prices and decelerating financial liquidity," Applied Economics Letters, Taylor & Francis Journals, vol. 26(9), pages 765-769, May.
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    Cited by:

    1. Loc Dong Truong & Nhien Tuyet Doan & Anh Thi Kim Nguyen, 2024. "The Effects of Geopolitical Risks on Oil Price Volatility," International Journal of Energy Economics and Policy, Econjournals, vol. 14(1), pages 427-432, January.
    2. Serap Vurur N. & Özdemir Letife & Özen Ercan & Grima Simon, 2024. "The Impact of Stock Prices of Polluting Energy Sources on Renewable Energy Stock Index Prices," Folia Oeconomica Stetinensia, Sciendo, vol. 24(2), pages 344-370.
    3. Ndekwa, Alberto Gabriel & Kalugendo, Elizeus & Sood, Kiran & Grima, Simon, 2023. "An Analysis of Agribusiness Digitalisation Transformation of the Sub-Saharan African Countries Small-Scale Farmers' Production Distribution," Research on World Agricultural Economy, Nan Yang Academy of Sciences Pte Ltd (NASS), vol. 4(3), September.
    4. Tomas Gabriel Bas, 2025. "Globalization vs. Glocalization: Learn Lessons from Two Global Crises, Such as the Russia–Ukraine Conflict and the COVID-19 Pandemic, for the Agro-Food and Agro-Industrial Sector," Agriculture, MDPI, vol. 15(2), pages 1-47, January.

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