Impact of Oil Prices and Exchange Rate on Agricultural Commodities

Abstract

The prime objective of the study is to explore the impact of oil prices and exchange rate on agricultural commodities (Maize & Wheat). The standard methodology of regression, correlation and descriptive statistics is used to explore the relationship between the oil prices, exchange rate and agricultural commodities by using monthly data from the period 1st June 2017 to 31st May 2022. We also discuss how exchange rate plays a vital role and have an effect on the prices of agricultural commodities and trade of the economy. In our methodology, we have taken two models; wheat and maize being our dependent variable and on the other hand we’ve taken exchange rate and oil prices to be our independent variables. This study reveals that Oil prices has a positive correlation with maize and exchange rate has a negative correlation with maize so this study accepts the H1 and H4 hypothesis. It also shows the inverse relationship between exchange rate and agricultural commodities. Moreover, we’ve found some significant results in regression, R square of 5.75 reveals that of the variability observed in the dependent variable is explained by the regression model in the methodology section. The adjusted R square shows us that the independent variable (oil prices and exchange rate has 50% effect on dependent variable. Coefficient variable tells us that there is a positive correlation between each independent variable and dependent variable.