Price volatility transmission among cereal markets. The evidences for Turkey

Abstract

The purpose of this study is to examine the price volatilities in corn, wheat and barley markets in Turkey, and to analyze the volatility transmission across the prices of these commodities. The Baba-Engle-Kraft-Kroner (BEKK) version of the multivariate Generalized Autoregressive Heteroskedastic (MGARCH) method was used to evaluate the conditional correlations and the time variation of the volatilities of the prices of the selected products on a monthly basis. The analysis period covers the timeframe between January 2003 and August 2017. The findings of the BEKK MGARCH model provide evidence that there is a one-way, strong and permanent volatility spillover from the corn and barley market to the wheat market. In addition, the findings of the conditional correlation analysis show that the wheat and feed market interdependence has increased to this extent for the first time since the global crisis. The results reveal that monitoring the livestock and feed policies in order to eliminate the problems in the wheat market would be beneficial. This study may be useful in designing better risk management tools for Turkish agriculture.