The Relationship between Oil and Brazilian Agricultural Commodities Prices

Many empirical studies have been conducted on the influence of international crude oil price movements on several markets, particularly on commodity markets which are crucial to the world economy. This paper aims to examine the conditional correlation between the returns of oil prices and certain agricultural commodities price returns, using appropriate multivariate GARCH models. The selection of such agricultural commodities takes into account their relevant weight in the Brazilian foreign trade. The results suggest that these models can be used for forecasting the behavior of the above-mentioned markets. All data have been obtained from weekly time series of the Brent type crude oil prices, in US$ per Barrel, and selected commodities FOB prices. The time period spanned by the analysis ranges from February 2004 to February 2012