Research Article
Can Global Economic Policy Uncertainty Drive the
Interdependence of Agricultural Commodity Prices?
Evidence from Partial Wavelet Coherence Analysis
SiawFrimpong ,
1
EmmanuelN.Gyamfi ,
2
ZanginaIshaq ,
1
SamuelKwakuAgyei ,
1
Daniel Agyapong ,
1
andAnokyeM.Adam
1
1
Department of Finance, School of Business, University of Cape Coast, Cape Coast, Ghana
2
GIMPA Business School, Accra, Ghana
Correspondence should be addressed to Anokye M. Adam; aadam@ucc.edu.gh
Received 6 August 2020; Revised 10 May 2021; Accepted 26 May 2021; Published 9 June 2021
Academic Editor: François P´ er´ es
Copyright©2021SiawFrimpongetal.isisanopenaccessarticledistributedundertheCreativeCommonsAttributionLicense,
which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
is paper employed wavelet coherence and partial wavelet coherence to investigate the time-frequency effect of global economic
policyuncertaintyonthecomovementoffiveagriculturalcommoditiessuchasmaize,oat,rice,soybean,andwheatusingmonthly
data from January 1997 to December 2019. In general, we observed heterogeneity in comovement structures of the agricultural
commodities market at different time-frequency scales which are profound at high frequencies from the bivariate wavelet
coherence. e partial wavelet coherence analysis shows that global economic policy uncertainty is a driver of agricultural
commodity market connectedness. is implies that extreme changes in economic policy uncertainty have the tendency to
influence commodity price comovement. is poses risk to the stability of the agricultural commodities market, which requires
the policymaker’s intervention to protect against the spillover risk contagion effect in uncertain times.
1.Introduction
e surge in price and price volatility of agricultural
commodities, especially food prices, has attracted the at-
tentionofacademics,policymakers,investors,farmers,and
consumers to this market because of its immediate impact
onfoodsecurityaroundtheworld,particularlylow-income
food-deficit countries. e prices of agricultural com-
modities have experienced long-term and sharp fluctua-
tions since the year 2000. e prices of major agricultural
commodities, from 2006, have generally exhibited upward
trends with a sharp fluctuation in 2013 and 2014. ese
behaviours have attributed to external factors such as
macroeconomic uncertainties, agricultural production, fi-
nancial crises, large and persistent demand, biofuels de-
mand, different stock market phases, and climate warming
[1–6]. For example, the outbreak of COVID-19 in 2019
has overturned the stagnation in food prices after its
downward trend in 2015-2016. e Food and Agricultural
Organisation Food Price Index surged to its highest level
since 2014.
Moreover, the financialization in commodity markets
has changed the dependency structure of agricultural
commodity markets [7, 8]. Consequently, the traditional
description of commodities in general as an asset class that
reliably delivers returns with low correlation to the stock
market has changed [9–13]. It instructive to note that ag-
ricultural commodity financialization has increased the
comovement and volatility spillover within its market and
with the traditional asset classes, limiting its diversification
benefits [14–17]. e interest of academics and market
participants has therefore been drawn to the level of
comovement and predictors of commodity prices and
volatility spillover [7, 17, 18]. e comovement or otherwise
of these commodities provides important information to
portfolio investors on diversification opportunities and
policymakers on policy interventions to mitigate price
fluctuations on the world poorest people.
Hindawi
Complexity
Volume 2021, Article ID 8848424, 13 pages
https://doi.org/10.1155/2021/8848424