The volatility connectedness among fertilisers and agricultural crop prices: Evidence from selected main agricultural products

Abstract

The price of fertiliser, which is one of the most important inputs of agricultural production, has increased significantly in recent years. In this study, we empirically analysed the effect of volatility in fertiliser prices on selected agricultural products by using the Diebold-Yilmaz connectedness approach, which is based on time-varying parameter (TVP) vector auto-regression (VAR). The findings showed that the spread of volatility and the interconnectedness between these variables increased in times of crisis and that the risk pass-through was due to fertiliser prices. However, empirical results showed that the price volatility of phosphate rock and urea was highly correlated to the volatility of other products. Furthermore, we found that sugar, soybean and cotton were the agricultural products most vulnerable to the effects of external shocks.

Keywords

• diebold-yilmaz approach
• dynamic connectedness
• time-varying parameter vector auto-regression
• volatility spillover