How macroeconomic factors and international prices affect agriculture prices volatility?-Evidence from GARCH-X model

Abstract

This study explains China's agricultural commodities volatility by using the short-term deviations along with the domestic macroeconomic factors as well as the international price factors. The GARCH-X model shows that the short-term deviations make significant and positive effect on volatility, and so, it can be taken as an important factors in estimating and forecasting the agricultural prices. However, it is disappointing that some of the macroeconomic factors are not significant in our model. This is because China is in a transition process, and many macroeconomic factors are not freely moved. Our study also analyzes China's policy and macroeconomic changes in last decades. To give a more thorough understanding about China's recent macroeconomic reform is also one of our objectives. © Springer International Publishing Switzerland 2014.