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Corresponding Author:
Ahdi N. Ajmi, College of Science and Humanities in Slayel, Salman bin Abdulaziz University, Kingdom of Saudi Arabia

Corresponding Coauthors:
Rangan Gupta, Department of Economics, University of Pretoria, Pretoria, South Africa
Monique Kruger, Department of Economics, University of Pretoria, Pretoria, South Africa
Nicola Schoeman, Department of Economics, University of Pretoria, Pretoria, South Africa
Leoné Walters, Department of Economics, University of Pretoria, Pretoria, South Africa

The Nonparametric Relationship between Oil and South African Agricultural Prices

(pp. 93-112)
JEL classification: C32, Q11, Q40
Keywords: Agricultural Prices, Oil Prices, Granger Causality, Nonlinearity, South Africa

Abstract

Abstract

The aim of this paper is to investigate the causal relationship between agricultural prices in South Africa and global oil prices.  A nonlinear Granger causality test based on moment conditions, introduced by Nishiyama et al. (2011) is employed and we find that there is indeed a causal relationship between global oil prices (OPEC basket (sourced from OPEC) and Brent Crude (sourced from the Fred database of the Federal Reserve Bank of St. Louis)) and certain South African agricultural commodity prices (sourced from Johannesburg Stock Exchange) over the period of 2003-2014 using daily data.   The mean price of wheat, sunflower and soya are Granger caused by OPEC basket oil price. OPEC basket oil prices also cause volatility of wheat, sunflower seed and sorghum prices.


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