TAF PUBLISHING

The primary purpose of this study is to examine the relationship between monthly energy and agriculture price indices. The research uses the Vector Error Correction Model (VECM) methods, taking into account the cointegrating relationship among the series of monthly observations from October 1973 to October 2018. Contrary to the findings of earlier studies, the empirical result of this research indicates that the oil price index responds to the equilibrium between agriculture and oil, and that is, the agricultural price index affects the energy price index and not the other way around. This study attempted to quantify the causal relationship between energy and agricultural price using the structural economic framework that recognized the fundamental problem in the relationship between energy and agriculture. Furthermore, this study presented a window of opportunity to closely examine the curious relationship between energy and agriculture prices.