Volatility Spillover between Water, Food and Energy

Peri, M.; Vandone, D.; Baldi, L.

Volatility Spillover between Water, Food and Energy

2017

Peri, M. | Vandone, D. | Baldi, L.

Water, food and energy are strongly interconnected. In this study we address this issue taking the lens of financial concerns to investigate the WFE relationship. Specifically, the aim of our paper is to analyze the volatility spillovres between indexes representing the financial component of WFE nexus. We use a multivariate GARCH model with daily data from November 2001 to May 2013. Water is proxy by equity index that represents the performance of the industry involved in water business both at global and local level. For the food and energy sectors we use two sub-indexes of S&P GF-Commodity Index. Our results highlight the existences of a financial nexus between WFE that is particular exacerbated during 2008 crisis. Evidence therefore suggests the need to better investigate the policy options that can be used to reduce price volatility in a framework of a rising relevance of water issues within the nexus.

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