The impacts of asymmetric oil shocks on agricultural commodity price: Application of nonlinear autoregressive distributed lags (NARDL) approach

The main objective of this article is analyzing the relationship between agricultural commodity price and oil shock for Iran. To this end, the nonlinear autoregressive distributed lags (NARDL) approach was employed which allows prices to be tied by asymmetric impact both in the long- as well as in the short-run. Linkages between oil price and agricultural commodity prices are examined using seasonal data for 1389:4 to 1395:4. The bounds test of the NARDL specification suggests the presence of co-integration among the variables, which include the agricultural commodity price, oil price and GDP. The estimated NARDL model affirms the presence of asymmetries in the agricultural product price behavior in both Long-run and short-run. Therefore, in the long and short-run, a positive significant relation between oil price increases and agricultural commodity price was found. In addition, the short and long-run significant relation between oil price reduction and the agricultural production price was estimated. Also, the positive oil price shock will result in higher changes in the agricultural commodity price as compared to the oil price reduction shock.