The Analysis Of Dynamic Influence Of International Oil Price Shock On Domestic Food Prices

With the continued rising of oil price and food price, the correlation between oilprice and food price have varied dramatically over the past ten years, impacted by therising and wide fluctuation of oil price, the rapid development of bio-energy as wellas the deepening trend of food financialization. Again this background, the problemof the correlation between oil price and food price has been a hot academic theme. Atfirst, this paper set up a two-sector economic partial equilibrium model, theoreticallyanalyzing the transmission routes of the influence of oil price shock on food price.Based on MS-VECM Model, we explored the asymmetry of impact path ofinternational oil price on domestic food price. Then this paper studied the regimetransition characteristics of the influence of world oil price on various kinds ofdomestic food price and its internal mechanism by using newly DSTCC-MGARCHModel and daily data of price of international crude oil futures and main kind of food(soybean, corn, wheat) futures from2004to2013. The main conclusion of this paperis listed as follows:Firstly, the rising price of international oil leads to rising cost of domestic foodproducing and transportation, which directly causing the rising of food price. Besides,the oil crisis would accelerate the expanding of bio-energy in China, leading to thecontinuing rising demand of energy crops, causing the price rising of energy cropswhich bring the overall rising of food price. With the deepening of the foodfinancialization, the correlation between food market and oil would become closer.Secondly, during different development stages of economy, the effects ofinternational oil price on domestic food price are asymmetrical. When theinternational oil price is rising rapidly, the domestic food price also rise, the world oilprice has a relatively significant impact on domestic food price; while the oil price isdescending, the domestic grain price show stickiness of lowering, and the influence ofoil price on food price became weak.Finally, our government has various macro-control policies on different kinds offood: the price of wheat is mainly regulated by government, with soybean mostly comes from importing, and the demand of corn, an energy food, is greatly increasingwhich causing upward pressure on prices. Among the three varieties of food，underthe pressure of the rises of oil prices，the correlation coefficients between the prices ofsoybean, corn, wheat and the price of oil show different degree of regime transitioncharacteristics. Before and after the regime transition point， the correlationcoefficient between soybean，corn prices and oil price has rose significantly，however，the correlation coefficient between corn price and oil price increasedconsiderably while that between wheat price and oil price increased relatively small.