The Dynamic Effects of Fuel Prices on Agricultural Commodity Prices in Thailand

Wanvilai Chulaphan; Barahona, Jorge Fidel; Pattana Jierwiriyapant; Chalermpon Jatuporn
May 2014
Australian Journal of Basic & Applied Sciences;May2014, Vol. 8 Issue 7, p323
Academic Journal
The expansion of policies that promote the use of alternative energy is said to be one of the causes of the sharp increase in fuel and agricultural commodity prices during the 2007-2008 world food price crisis. Energy policies that encourage the usage of agricultural commodities as an alternative energy usage may link the oil and agricultural commodity markets. The question is whether the fuel prices have a causal affect agricultural commodity prices in Thailand. Therefore, this study identifies the causal relationship between fuel prices and agricultural commodity prices using time series analyses. The results confirm that changes in fuel price affect the movement of sugar prices in the long-run relationship but the effects do not transmit to rice and cassava prices. Granger causality test and impulse response function results conclude that the movement of sugar prices is driven by fuel prices and the shock form fuel prices transfer strong effect to the movement of sugar prices. These results can be used to predict the implication of energy policies. Finally, this study provides implication for policy design.


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