Energy-Food Commodity Price Movement and Equation in Kyoto (2006) Perspectiv: Factor Analysis and Nonlinear Framework

Abstract

Energy and food are two major commodities. From a macro point of view, the movement and the relationship between commodity duos’ prices are highly concerning researchers, policymakers, and economists. This paper aims to investigate the link between energy and food price using a nonlinear framework for the period of 1991–2020. For this purpose, we calculated proxy factor index variables instead of each commodity duo by a factor analysis method using all contents of international commodity price indexe: FAO Food Price Index and IMF Commodity Energy Price Index. We applied Enders and Granger (J Bus Econ Stat 16:304–311, 1998) MTAR and KSS (2003) nonlinear unit root tests, KSS (2006) nonlinear cointegration test, and Diks and Panchenko (J Econ Dyn Control 30:1647–1669, 2006) nonlinear causality test. The results of nonlinear causality test indicated that there is a bidirectional relationship from food to energy price in the full sample. The Kyoto Protocol (2006), the most important treatment for decreasing carbon emission, caused to increase nonfood use of agricultural production, and this changed the relationship between energy and food prices. In the Kyoto (2006) break perspective, the results show that there is no nonlinear causality relationship between energy and food price in the pre-Kyoto (2006) subsample. But in post-2006 subsample, there is a nonlinear unidirectional causal relationship running from energy to food price. The causal effect is fluctuant for energy and food price nonlinear causality, which requires us to identify different causality fields for solving a specific problem. © 2025 Elsevier B.V., All rights reserved.