A comparative analysis on volatility transmission of inflation, exchange rates, crude oil prices with selected agricultural product prices: A case of Ghana and Turkey

Shift from cereals and grain consumption to dairy and meat products, the 2006-2008 global food crisis, crude-related and import nature of agricultural production inputs are causes of current volatility transmisson in agricultural markets. Weakening domestic currencies against the US Dollar for imported inputs is another contributory factor to agricultural product volatility. The result is price instability, risk and uncertainty in agricultural markets in developing countries. Based on this, the objective of this study was to estimate the volatility transmisson along with its directions and magnitudes among inflation, exchange rate, world crude oil price with selected agricultural product prices in Ghana and Turkey. The volatile behavior of agricultural markets in these countries is a reason for determining the volatility transmission between macroeconomic variables and the selected agricultural product prices and confirms the risk in agricultural product supplies. This was achieved by utilizing data from January, 2000 to December, 2015 on crude oil price, inflation and exchange rates with selected agricultural product prices in Ghana and Turkey. We applied the BEKK-MGARCH model for direct and indirect volatility transmissons for that purpose. Results showed exchange rate transmitted more volatility to agricultural product prices compared to inflation and world crude oil prices in the two countries. In addition, as compared to Gana agricultural markets in Turkey are more resistant to fluctuations in macroeconomic variables. Optimal weights showed Turkey with a low price risk compared to Ghana. This is attributed to the stability of Turkey's Lira relative to Ghana Cedi.