Analysis of Olive Oil Market Volatility using the ARCH and GARCH techniques


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Abstract

Agricultural prices variation analysis is essential for the formulation of public policies and business decisions. Considering the strategic importance of olive oil for producers and consumers alike, as well as its potential economic and social benefits, this study aims to quantify the volatility of olive oil prices. The models are estimated using monthly data of olive oil prices (from January 1980 to February 2017) that was collected from IMF statistics. ARCH and GARCH models were used to estimate price volatility. Our results for olive oil show that volatility clashes of prices does not last for a long period of time, and thus olive oil is an interesting culture for new producer markets, as it is not a product that suffers from a huge volatility in price in the international market, mitigating the risk to rural producers and encouraging new local businesses. This study is limited by the data analysed and the methodology used. Further research should include more data and other statistical approaches (e.g., econometric panel data that considers different countries and several explanatory variables for price volatility).Keywords: Olive oil, volatility, ARCH, and GARCH.JEL Classifications: Q02; Q42; O13DOI: https://doi.org/10.32479/ijeep.9138

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Author Biographies

Tiago Silveira Gontijo, Federal University of Minas Gerais - UFMG

Industrial Engineering Department. Avenue Antônio Carlos, 6627 - Pampulha, Belo Horizonte - MG. Brazil.

Alexandre de Cássio Rodrigues, FUMEC University

Faculty of Economic and Administrative Sciences (FACE). Street Cobre, 200 - Cruzeiro, Belo Horizonte - MG, Brazil.

Cristiana Fernandes De Muylder, FUMEC University

Faculty of Economic and Administrative Sciences (FACE). Street Cobre, 200 - Cruzeiro, Belo Horizonte - MG, Brazil.

Jefferson Lopes la Falce, FUMEC University

Faculty of Economic and Administrative Sciences (FACE). Street Cobre, 200 - Cruzeiro, Belo Horizonte - MG, Brazil.

Thiago Henrique Martins Pereira, FUMEC University

Faculty of Economic and Administrative Sciences (FACE). Street Cobre, 200 - Cruzeiro, Belo Horizonte - MG, Brazil. 

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Published

2020-03-17

How to Cite

Gontijo, T. S., Rodrigues, A. de C., De Muylder, C. F., la Falce, J. L., & Pereira, T. H. M. (2020). Analysis of Olive Oil Market Volatility using the ARCH and GARCH techniques. International Journal of Energy Economics and Policy, 10(3), 423–428. Retrieved from https://econjournals.com/index.php/ijeep/article/view/9138

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