Response of Cotton to Oil Price Shocks

Abstract

This paper shows that the response of cotton prices in the U.S. to fluctuations in oil prices in the international market may differ greatly depending on whether the increase is driven by demand or supply shocks in the crude oil market. In the long-run, around 3 percent of the variability in cotton prices can be attributed to shocks to global demand for industrial commodities while none can be traced to oil supply shocks.cotton, oil price, demand shocks, supply shocks, structural vector autoregression (SVAR), Agricultural and Food Policy, Demand and Price Analysis, Q11, Q41,