Price Volatility of Grains: Relationship with Crude Oil Price Using CCC-Multivariate GARCH Model

Abstract

Agricultural commodities price have increased and become significantly more volatile during the past few years periods. The high agricultural commodity prices in recent years have raised the question of whether or not volatility is increasing and leading to more frequent extreme price swings. This paper measures the volatility of food commodity prices using multivariate GARCH. Lagged conditional variance and lagged square distribute have an important on the conditional variance. Moreover, the coefficient of the lagged square effect was positive and statistically significant for feed crop market. We conclude that strong GARCH effects were apparent for agricultural market.