How is Volatility in Commodity Markets Linked to Oil Price Shocks?

Maryam Ahmadi, Niaz Bashiri Behmiri and Matteo Manera ()
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Maryam Ahmadi: Lombardi Advanced School of Economic Research (LASER) and University of Milan

No 2015.101, Working Papers from Fondazione Eni Enrico Mattei

Abstract: This study investigates the effects of oil price shocks on volatility of selected agricultural and metal commodities. To achieve this goal, we decompose an oil price shock to its underlying components, including macroeconomics and oil specific shocks. The applied methodology is the structural vector autoregressive (SVAR) model and the time span is from April 1983 to December 2013. The investigation is divided into two subsamples, before and after 2006 for agricultures taking into account the 2006-2008 food crisis, and before and after 2008 for metals considering the recent global financial crisis. The validity of time divisions is confirmed by historical decomposition accomplishment. We find that, based on impulse response functions, the response of volatility of each commodity to an oil price shock differs significantly depending on the underlying cause of the shock for the both pre and post-crisis periods. moreover, according to variance decomposition the explanatory power of oil shocks becomes stronger after the crisis. The different responses of commodities are described in detail by investigating market characteristics in each period.

Keywords: Metals; Commodities; Volatility; Oil Price (search for similar items in EconPapers)
JEL-codes: C22 Q02 Q14 Q41 (search for similar items in EconPapers)
Date: 2015-10
New Economics Papers: this item is included in nep-agr and nep-ene
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: How is volatility in commodity markets linked to oil price shocks? (2016)
Working Paper: How is Volatility in Commodity Markets Linked to Oil Price Shocks? (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:fem:femwpa:2015.101

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