Asymmetric causality in quantiles analysis of the oil-food nexus since the 1960s

This paper examines the causal relationship between crude oil price and world food price between January 1960 and September 2019. Different from prior studies, it implements an asymmetric causality in quantiles approach. Results report that oil price causes food price under all food market conditions, while the causality from food to oil price runs only during extreme oil market conditions. When accounting for asymmetry, results confirm the presence of Granger causality running from positive and negative oil price changes to food price at almost all quantiles. However, positive and negative food price changes Granger cause oil price only over the lower and upper tail of the oil price distribution. Finally, when controlling for structural breaks, findings suggest that the nature of the bidirectional causal relationship has changed since 2008. The findings of the paper have implications for policymakers and investors in the design of food security policies and investment decisions.