The impact of geopolitical risk on the international agricultural market: Empirical analysis based on the GJR-GARCH-MIDAS model
arxiv(2024)
摘要
The current international landscape is turbulent and unstable, with frequent
outbreaks of geopolitical conflicts worldwide. Geopolitical risk has emerged as
a significant threat to regional and global peace, stability, and economic
prosperity, causing serious disruptions to the global food system and food
security. Focusing on the international food market, this paper builds
different dimensions of geopolitical risk measures based on the random matrix
theory and constructs single- and two-factor GJR-GARCH-MIDAS models with fixed
time span and rolling window, respectively, to investigate the impact of
geopolitical risk on food market volatility. The findings indicate that
modeling based on rolling window performs better in describing the overall
volatility of the wheat, maize, soybean, and rice markets, and the two-factor
models generally exhibit stronger explanatory power in most cases. In terms of
short-term fluctuations, all four staple food markets demonstrate obvious
volatility clustering and high volatility persistence, without significant
asymmetry. Regarding long-term volatility, the realized volatility of wheat,
maize, and soybean significantly exacerbates their long-run market volatility.
Additionally, geopolitical risks of different dimensions show varying
directions and degrees of effects in explaining the long-term market volatility
of the four staple food commodities. This study contributes to the
understanding of the macro-drivers of food market fluctuations, provides useful
information for investment using agricultural futures, and offers valuable
insights into maintaining the stable operation of food markets and safeguarding
global food security.
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