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Co-integration of Oil and Commodity Prices: A Comprehensive ApproachAbstract

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Listed:
  • Mohcine Bakhat

    (Economics for Energy and Rede (Universidade de Vigo))

  • Klaas WŸrzburg

    (Economics for Energy and Rede (Universidade de Vigo))

Abstract

Past research has mainly applied linear cointegration analysis to study the relationship of crude oil prices with the prices of other commodities. However, recent methodological innovations in cointegration analysis allow for a more thorough analysis of the co-movement of commodity prices and detect asymmetric and thresholds co-movements. Following Enders and Siklos (2001) and Hansen and Seo (2002), we apply threshold cointegration analysis, detecting co-movements that earlier studies based on linear cointegration analysis could not detect. We find that adjustments to positive and negative deviations from the long-run equilibrium are asymmetric for copper, food and agricultural raw materials in the short-run. Moreover, the adjustments for aluminum and nickel are symmetric. The price Granger causalities behave as expected for metals and agricultural raw material prices. Food prices, however, behave differently. In sum, the results of this paper underscore the importance of consistently testing nonlinear cointegration and point out the complex interactions that take place between the markets of oil and other commodities.

Suggested Citation

  • Mohcine Bakhat & Klaas WŸrzburg, 2013. "Co-integration of Oil and Commodity Prices: A Comprehensive ApproachAbstract," Working Papers fa05-2013, Economics for Energy.
    • Handle: RePEc:efe:wpaper:fa05-2013
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    References listed on IDEAS

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    More about this item

    Keywords

    linear; threshold; metals; raw materials; agriculture;
    All these keywords.

    JEL classification:

    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • Q21 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Demand and Supply; Prices
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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