1 1 The Long Run Relationship Between Petroleum And Cereals Prices: Evidence From Cointegration Tests

This study seeks to investigate whether or not there is a long-term relationship between Petroleum and cereals prices. To that end, the bivariate cointegration approach using Engle-Granger two-stage estimation procedure is applied. The study utilises monthly data over the period of January 1980 until March 2008. The results show that there is evidence of long-run equilibrium relation between the two products prices. The estimates of the error correction models reveal a unidirectional long- run causality flowing from petroleum to cereals prices