Who moves first? Resource price interdependence through time-varying Granger causality

Abstract

This paper investigates the interdependence among natural resource prices. Commodities belonging to three different groups (energy commodities, metals, agricultural commodities) are considered. The analysis is performed via a battery of time-varying Granger causality tests. They allow to assess whether price interdependence occurs and to identify the candidate first movers. These tests also allow observing how long and in which subperiods these causality relationships occur. The approach is applied to the monthly prices of 11 natural resources over the 1980–2021 period. Results suggest that interdependence is weak for energy and agricultural commodities and often concerns limited time periods, while it seems stronger and longer lasting among metals. Moreover, if an overall price driver has to be identified, agricultural commodities more than oil seem to be the best candidates.