Energy Economics 116 (2022) 106422

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Energy Economics
journal homepage: www.elsevier.com/locate/eneeco

Do biofuel production and financial speculation in agricultural

commodities influence African food prices? New evidence from a TVP-VAR
extended joint connectedness approach
Jin Guo *, Tetsuji Tanaka
Department of Economics, Setsunan University, 17-8 Ikedanakamachi, Neyagawa, Osaka 572-8508, Japan

A R T I C L E I N F O A B S T R A C T

JEL classifications: Many African countries experienced social disorder and subsequent political instability as a result of global
C32 commodity price inflation in 2007–2008, which reaffirmed the importance of overseas factors such as biofuel
D84 production, international food and energy prices, and financial speculation. Biofuel, in particular, is often placed
O13
at the center of the debate around identifying potential determinants of food price hikes. We apply a time-
Q16
Q18
varying parameter vector autoregressive (TVP-VAR) extended joint connectedness approach to uncover the
N57 dynamic connectivity of African food prices, US biofuel production, global energy and food prices, and financial
Keywords:
speculation. The key findings are; 1) the results of averaged connectedness suggest that US biofuel production
Biofuel production and financial speculation in agricultural commodities significantly influence African food prices; 2) the hefty
African food prices surges in the dynamic connectedness between African food prices and four cross-border factors are triggered by
Speculation in agricultural commodities global events like the 2000 dot-com bubble, the 2008 global commodity boom, and the 2020 COVID-19
Dynamic connectedness pandemic; 3) arbitrage transactions transmitted intense shocks to African food prices between 2001 and 2012,
TVP-VAR while biofuel production constantly affected African food prices between 2001 and 2021. We draw pragmatic
policy implications to prevent or mitigate market shock transmissions to African food markets.

1. Introduction
The Russian invasion of Ukraine provoked international market
disorder for wheat, fuel, and fertilizer, and many African countries are
likely to face continuing food shortages and high food prices due to the
heavy dependence on Russia and Ukraine for wheat, which accounts for
nearly a third (32%) of total African wheat imports (Yusuf, 2022; Bag­
wandeen and Vutula, 2022). Some individual countries are even more
dependent; for example, both Eritrea and Benin receive 100% of their
wheat from Russia and Ukraine, with others not far behind, specifically
Sudan (79%), Egypt (78%), Djibouti (76%), Tanzania (73%), Somalia
(68%), Rwanda (64%), Congo Republic (63%), the Democratic Republic
of Congo (62%), Senegal (60%), and Madagascar (59%) (Warah, 2022).
Rising living costs across the continent due to high food, fertilizer, and
fuel prices, together with drought in the Horn regions and in East Africa,
are likely to cause social unrest and political turmoil (Warah, 2022).
Historically, food prices often impact politics (Rudé, 1964). Eighteen
African countries experienced 26 civil rebellions in the wake of the
global commodity price spikes between 2007 and 2008 (World Bank
Food Riot Radar, 2020), which reaffirms the importance of managing
shocks from foreign markets (Berazneva and Lee, 2013). Overseas
shocks might be more easily transmitted to domestic markets partly due
to deeper international economic integration through regional trade
agreements, which increased in number from 28 to 571 between 1990
and 2021 (World Trade Organization, 2022). However, a copious body
of literature focuses on price transmissions between domestic markets
(e.g., Lutz et al., 2006; Myers, 2008) or between foreign markets (e.g.,
Conforti, 2004; Minot, 2011; Ceballos et al., 2017). Although several
papers identify local factors behind social unrest (e.g., Hendrix and
Haggard, 2015; Berazneva and Lee, 2013; Smith, 2014), only a few ar­
ticles concentrate on potential international determinants (Bellemare,
2015; Fukui et al., 2022). Though many African food markets seem
vulnerable to overseas shocks, including shifts in biofuel policies,
financial markets, and international energy and food markets, no
comprehensive quantification research has thoroughly scrutinized the
impacts of these elements on local food prices in Africa, as far as we are
aware.
Global biofuel production has grown rapidly over the past two

* Corresponding author.
E-mail addresses: kaku@econ.setsunan.ac.jp (J. Guo), tetsuji.tanaka@econ.setsunan.ac.jp (T. Tanaka).

https://doi.org/10.1016/j.eneco.2022.106422
Received 29 June 2022; Received in revised form 7 November 2022; Accepted 14 November 2022
Available online 24 November 2022
0140-9883/© 2022 Elsevier B.V. All rights reserved.
J. Guo and T. Tanaka
decades. For instance, US ethanol and biodiesel production increased
more than 8 and 200 times between 2005 and 2019, respectively (US
Energy Information Administration, 2021). The United States, one of the
largest biofuel and corn producers, subsidizes biofuel production and, at
present, around 40% of corn production in the country goes to ethanol
factories. For this reason, politicians and media outlets often condemn
biofuel production as a menace to food security (AGWEB, 2011; Chak­
rabortty, 2008). Academics also regard such “clean energy” as one of the
main drivers behind global food price hikes in 2008 (Von Braun et al.,
2008; Heady and Fan, 2008; Yang et al., 2008), and some studies found a
number of adverse economic effects of biofuel production on developing
markets, using computable general equilibrium (CGE) models (Al-Riffai
et al., 2017; Timilsina et al., 2012).1
There are two main impact channels between energy and food
markets. First, energy prices push up the cost of agricultural production
and transport, including fertilizer and fuel for tractors and trucks. For
example, crude oil price rises could explain approximately 30% of the
wheat and maize price hikes in 2008 (Yang et al., 2008). Second, high
crude oil prices induce biofuel prices to rise as a substitutive good,
leading to more biofuel production, more demand for feedstock mate­
rials, and higher agricultural prices. Many studies have empirically
demonstrated the correlation between food and fuel prices, using
quantitative methods. For example, Meyer et al. (2018) conclude that oil
and food prices are positively correlated in the long run, although the oil
price has no relationship to food prices in the long term when prices go
down. Olayungbo (2021) finds that oil and food prices are negatively
correlated in the short term, and positively correlated over the long run.
A few studies investigate the connection between international energy
prices and food prices in developing countries (Nazlioglu and Soytas,
2011; Zhang et al., 2009; Alghalith, 2010).
Financial markets can also play a significant role in determining food
prices. The assets managed by hedge funds have grown rapidly in recent
decades, with a 2461% jump in assets under management (AUM) from
1997 to 2017 (BarclayHedge, 2018). While a large body of literature
identifies the influence of financial speculation on food prices (e.g.,
Timmer, 2009; Robles et al., 2009; Gilbert, 2010; McPhail et al., 2012;
Bredin et al., 2021), Sanders et al. (2008) and Wright (2009) argue that
speculative activities in the futures markets has only a limited effect on
grain price volatility.
It is essential to grasp an overview of food consumption patterns in
Africa to analyze food security.2 The dependency of Africa on external
markets for cereals ranges between 30% and 36% from 2013 to 2019.
Fig. 1 shows the cereal consumption pattern in Africa. We can see that
corn and wheat are the most popular cereal products in the region, with
31% and 30% shares in the total cereal calorie intake, respectively,
followed by rice. Moreover, according to FAOSTAT, wheat has the
lowest self-sufficiency among cereals, with around 30%, followed by
rice. While sorghum and soybean do not deliver significant proportions
of the total calorie intake, other staple food commodities, such as wheat,
corn, rice, and cassava, provide high percentages in most nations. For
instance, the countries with the highest calorie-intake share of wheat,
corn, rice, and cassava are Tunisia (45%), Lesotho (49%), Madagascar
(55%), and the Democratic Republic of Congo (53%). Hence, Tunisia
and Lesotho are particularly vulnerable to the war between Russia and
Ukraine, as is bioethanol production in the US (whose primary feedstock
is corn). Biodiesel production in the US, whose main feedstock is soy­
bean, may not be seriously detrimental to food security in Africa,
although factors could indirectly influence African food markets.
In summary, food security in African countries seems to be
1 external factors, enabling us to identify dynamic changes in indi­
See the Literature review (Section 2) for more detailed information on past
studies analyzing the impacts of biofuels, financial speculation, and energy
prices.
2
All the statistics in this paragraph are quoted from the United Nations'
FAOSTAT data.
2
Energy Economics 116 (2022) 106422
Fig. 1. The cereal consumption pattern in Africa.
Data source: FAOSTAT.
susceptible to geographically remote factors such as biofuel
manufacturing, speculative activities, and international energy and food
prices, at least partly as a result of the accelerated integration of the
global economy through free trade agreements. However, no compre­
hensive research focuses on the impacts of various foreign factors on
Africa's local food prices, as far as we are aware. Furthermore, this
research area is technologically left behind in econometric models. To
fill this gap, our paper adopts two types of cutting-edge quantification
techniques to investigate the dynamic direction and intensity of the
linkages between African food prices and cross-border factors.
In recent years, the network connectedness approach, developed by
Diebold and Yilmaz (2012, 2014), has been widely applied to evaluate
information transmission and spillovers in a predetermined network.
Given the method's practicability and applicability, several studies have
been conducted to extend the original approach. Antonakakis et al.
(2020) employs the time-varying parameter vector autoregressive (TVP-
VAR) approach, which overcomes multiple issues arising from the
originally proposed connectedness. Moreover, the TVP-VAR extended
joint connectedness approach introduced by Balcilar et al. (2021) refines
existing TVP-VAR methods by considering an alternative way of
normalizing connectedness measures (see the Methodology section for
details on the two approaches). This article applies these latest econo­
metric techniques to examine the dynamic connectedness among Afri­
can food prices, US biofuel production, global energy and food prices,
and financial speculation, over the sample period from January 2001 to
July 2021. Our experiments allow us to visualize the dynamic variations
of pairwise transmission effects between all variables. We also compare
the dynamic connectedness estimated by the standard TVP-VAR model
with the TVP-VAR extended joint connectedness approach to reinforce
the trustworthiness of the results.
The primary contributions of this article are as follows:
1) our research is the first to assess the impacts of various overseas
factors (i.e., US biofuel production, speculation, and global energy
and food prices) on food prices in the whole of Africa with an
econometric model;
2) we apply two different types of TVP-VAR models to systematically
examine, for the first time, the international effects of various
vidual connectivity and extract useful policy-making information on
the biofuel, energy, and financial markets;
3) our empirical results have important implications for policy-makers
in African countries in constructing food security strategies that can
J. Guo and T. Tanaka Energy Economics 116 (2022) 106422

Table 1 Economists have also attempted to estimate biofuel impacts on in­

Definitions of the variables used in the empirical analysis. ternational markets. Subramaniam et al. (2019) apply the generalized
Variable Symbol Definition Source method of moments to identify the determinants of food security. They
test for the four dimensions of food security by population growth,
African food Nominal food price index for
price
AFP
Africa.
FAOSTAT carbon dioxide emissions, arable land, per capita GDP, unemployment,
US Energy food price index, biofuel production, credit provided to the agricultural
Biofuel Production of ethanol and
production
BFP
biodiesel in the US.
Information sector, and income inequality, and find that many of the explanatory
Administration variables, including biofuel production, significantly influence the di­
The energy price index
includes a simple average of
mensions of food security. Tanaka et al. (2012) evaluate bioethanol and
International four prices: crude oil IMF Commodity biodiesel production between 2007 and 2008 to assess the short-term
IEP
energy price (petroleum), natural gas, Prices effects of potential factors behind the global food crisis with interna­
coal price, and propane tional grain prices, using a global CGE model. They found that biofuel
indices.
production pushed up corn prices by 8.1%, accounting for 12.1% of the
The food price index includes
International cereal, vegetable oils, meat, IMF Commodity corn price spike in the period. McPhail et al. (2012) construct a struc­
IFP tural vector autoregression (SVAR) and variance decomposition with
food price seafood, sugar, and other Prices
foods. data from January 2000 to July 2011. It is a rare paper that employs
Number of long and short ethanol production as data, rather than its price.
Non- contracts for agricultural
commercial NCP commodities (i.e., wheat,
Chicago Board of Guo and Tanaka (2022b) analyze the price interconnection between
Trade US bioethanol, corn and gasoline markets, using partial wavelet coher­
position soybean, corn, and rice) by
non-commercial traders. ence and spillover index methods. They concentrate on wholesale and
Note: The African food price index is deflated by the African consumer price
producer prices, while most research related to “fuel versus food” issues
index (FAOSTAT, 2022). International energy and food prices are deflated by the utilizes futures or spot prices, whose markets include non-commercial
US consumer price index (the consumer price index for all urban consumers: all traders. The study clarifies that ethanol and gasoline prices tend to be
items in US city average, index) from Federal Reserve Economic Data. positively correlated with the corn price in the short run, while gasoline
and ethanol prices are positively and negatively associated with the corn
alleviate the impact of international energy, food, and financial price in the long run, respectively. They uncover that speculative
market shocks on domestic food markets. transactions determine corn price changes in the short run, while the oil
price is the most significant cause in the long run. Nevertheless, the
The remainder of this paper is organized as follows; Section 2 gives authors find that US ethanol production does not significantly affect
an overview of the related literature; Section 3 lays out the data used; international corn prices.
Section 4 discusses the methodology; and Section 5 presents the
empirical results. We conclude the study in Section 6. 2.2. Global energy price

2. Literature review
The main objective of the current research is to analyze the impacts
of US biofuel production and other potentially threatening factors on
food prices in Africa. This section reviews extant studies examining the
impacts of biofuel, global energy and food prices, and speculation on
economies.
2.1. Biofuels
Quantitative assessments of biofuel policies for African countries
have been conducted (Nakamya and Romstad, 2020; Nakamya, 2022;
Hartley et al., 2019; Herrmann et al., 2018) as well as for other devel­
oping countries (Banerjee, 2021; Lin and Jia, 2020; Dong et al., 2020; Ge
and Lei, 2017; Wianwiwat and Asafu-Adjaye, 2012). Though these
studies evaluate biofuel impacts on the domestic markets within each
region and do not estimate its cross-border effects, several papers
address the issue using world-scale quantitative models. Durham et al.
(2012) establish the AGLINK-COSIMO model to investigate biofuel
policies and demonstrate that coarse grain prices could be mitigated by a
maximum of 15% if the EU biofuel mandate is eliminated.
Timilsina et al. (2012) build a global CGE model with a land-use
module to investigate the long-run effects of biofuel production on
land-use change, food supply, and prices. The main finding is that bio­
fuel expansion is likely to decrease global gross domestic product (GDP)
and reduce the world's food supply to some extent, causing the prices of
feedstocks to rise significantly. Importantly, low- and middle-income
countries could suffer more significant adverse effects than high-
income nations. Al-Riffai et al. (2017) discuss the impacts of the EU
biofuel mandate using a global CGE model and argue that the EU biofuel
policy slightly exacerbates the real income of developing countries, such
as those in Sub-Saharan Africa.
Although many economists analyze the connectedness between food
and oil prices, most studies concentrate on the relationships between
commodities in developed, futures, or international markets (Harri
et al., 2009; Cha and Bae, 2011; Trujillo-Barrera et al., 2012; Avalos,
2014; Arshad and Hameed, 2009; Nazlioglu and Soytas, 2011; McPhail
et al., 2012; Roboredo, 2012). Only a few publications probe the price
return or volatility transmissions between global and developing mar­
kets. For instance, Zhang et al. (2009) find that crude oil is not the most
significant factor in raising local food prices in China. Nazlioglu and
Soytas (2011) examine the crude oil price, the Turkish lira / US dollar
exchange rate, and agricultural commodity prices in Turkey, and
conclude that the oil price is a determinant of local commodity prices.
Alghalith (2010) investigated the relationship between food and oil
prices for Trinidad and Tobago and demonstrated highly correlated re­
lationships between the two goods.
2.3. Global food prices
A few papers investigate the association between world and local
food prices in African countries. Conforti (2004) finds that the degree of
global price transmission to African regional prices is slower than that of
other countries, and that cereal price transmission is high and fast
compared to other products, such as oilseeds and livestock. Ceballos
et al. (2017) apply a bivariate T-BEKK model to examine price return
and volatility transmissions between world and regional markets for
Africa, South Asia, and Latin America, and uncover significant price
return transmissions from global to local markets in few cases, while
stronger price volatility spillovers are found between the markets. Minot
(2011) establishes error correction models to investigate the food price
relationships between global and Sub-Saharan African markets and finds
that 13 out of 62 African prices present long-term relationships with the
global market, and that rice prices are more intimately related to in­
ternational markets than maize prices.

3
J. Guo and T. Tanaka Energy Economics 116 (2022) 106422

Table 2
Summary statistics of monthly growth rates and preliminary tests for all variables.
Mean Median Std. Dev. Skewness Kurtosis J-B test Q2(12)

AFP 0.0009 0.0007 0.0129 0.1170 5.3235 55.8964*** 21.760**

BFP 0.0095 0.0091 0.1968 − 3.8871 48.4854 21,825.9300*** 21.006**
IEP 0.0015 0.0089 0.2317 − 1.0284 6.7329 186.1957*** 69.266***
IFP 0.0016 0.0006 0.0695 − 0.1533 3.9243 9.7201*** 23.865**
NCP 0.0048 0.0061 0.4389 − 0.2327 3.0352 2.2329 20.218*

Note: *, **, and *** denote statistical significance at the 10%, 5% and 1% levels, respectively. J-B is the Jarque and Bera (1980) test. The Ljung-Box test indicates that
the null hypothesis of no autocorrelation up to order 12 for the squared standard residuals (Q2(12)) cannot be rejected at the 1% significance level.

Table 3 Most literature regarding the effects of speculative activity on food

Unit root tests for all variables. (or commodity) prices focuses on the spot or futures prices. However,
ADF KPSS Lehecka (2014) provides precious research investigating those re­
lationships using the FAOSTAT food price index and MSCI World Stock
Natural First differences Natural First
logarithm of of natural logarithm of differences of Market Index. The author analyzes market integration between food and
levels logarithm levels natural stock markets from 1990 to 2012 and concludes that, while co-
logarithm movements are weakly indicated by structural changes, market inte­
0.2400*** gration intensified in the wake of the Great Recession in 2008. Sal­
AFP − 1.5809 (0) − 12.5267*** (0) 0.0666 (4)
(12) mensuu (2020) examines the speculative effects in the potato market in
0.4853*** India, using rolling-window Granger causality, and confirms that
BFP − 0.7471 (2) − 12.0998*** (1) 0.0848 (16)
(12)
demand-side speculation was most significant during the food crisis in
0.3778***
IEP − 2.1861 (1) − 11.1863*** (0)
(12)
0.0646 (4) 2008, while supply-side speculation was rarely detected. Wimmer et al.
0.3974*** (2021) conduct a meta-analysis of speculation effects on commodity
IFP − 2.2081 (1) − 11.8619*** (0) 0.0710 (5)
(12) prices using p-values collected from Granger causality tests. The primary
0.3690*** result indicates that articles published in highly ranked journals signify
NCP − 1.7683 (2) − 19.7064*** (1) 0.1318 (63)
(11)
weak evidence to drive commodity prices.
Note: *** denotes statistical significance at the 1% level. Numbers in brackets In summary, most literature concentrates on domestic factors, and
are the lag length for the ADF test and bandwidth for the KPSS test. Lag length research gauging cross-border spillover effects are scarce. Even papers
selection is based on the Schwarz Information Criterion, and the bandwidth is focusing on global impacts analyze neither the food prices across the
determined using the Bartlett kernel and Newey-West bandwidth selection al­
whole of Africa, nor various foreign market factors. Considering that
gorithm (Newey and West, 1994).
biofuels are often blamed for food insecurity, and clean energy attracts
much attention for its carbon neutrality potential, African economies
2.4. Speculation should be prioritized for analysis since they hold significant low-income
and food-insecure populations. In terms of econometric methodology,
This research identifies the impacts of speculative activities on food the TVP-VAR approach is a powerful tool to monitor the dynamics of
prices in Africa, so we utilize long and short position contracts by non- complex networks, which is best suited for identifying transmission
commercial traders. Several existing studies measure the price trans­ spillovers from various foreign potential elements.
missions in the spot and futures markets of food, energy, and precious
metals to specify speculative effects (e.g., Robles et al., 2009). Research 3. Data
papers that employ financial contract data as a proxy for speculation
with quantitative models do exist, but are few and far between. For To elucidate the mechanisms governing food prices in Africa, we
example, Bredin et al. (2021) examine the impact of short-term specu­ obtain the aggregated real food price index for Africa, biofuel produc­
lative motives (i.e., manipulators and speculators) on the spot and fu­ tion in the US, speculative activities in commodity futures markets, and
tures prices of six food commodities and uncover that both play a limited the global food and energy price indices spanning January 2001 to July
role in adjusting price levels. Robles et al. (2009) develop a rolling 2021 (Table 1). The food price index and consumer price index for Africa
Granger causality model to discover the linkages between speculative are retrieved from FAOSTAT, and we deflate the African food price
proxies and food commodity prices, and their estimates exhibit positive index by the African consumer price index. The US biofuel production
relationships between the variables. data, comprising ethanol and biodiesel production, were acquired from
Irwin et al. (2009) employ Granger causality to identify the role of the Energy Information Administration. Following Robles et al. (2009),
speculation in the 2008 commodity boom and discover that the price we use the volume of future contracts (long and short futures contracts)
boom and bust were not driven by speculative behavior. McPhail et al. of staple food commodities (i.e., wheat, rice, corn, and soybean) by non-
(2012) attempt to explain corn price volatility by quantifying the rela­ commercial traders at the Chicago Board of Trade as a proxy for spec­
tive factors' importance: global demand, speculation, and energy price/ ulation, as the total volume of non-commercial futures contracts reveals
policy. They find that speculation is significant only in the short run, the level of market participation or enthusiasm by speculators.
while the energy price is the most critical factor in the long run. Gilbert International energy and food price indices from International
(2010) uses Granger causality to identify the role of demand growth, Monetary Fund Commodity Prices were utilized, and both were also
quantitative easing, and exchange rates, and uncovers that the demand deflated by the US consumer price index from Federal Reserve Economic
for grains and oilseeds are weak determinants, and that index-based Data, as global energy and food prices are measured in US dollars.
investment in agricultural futures markets is the primary cause. Bohl Table 1 provides the definitions of all the variables used in the empirical
et al. (2013) analyze how commodity spot prices are affected by open analysis.
interest, finding little evidence that speculation affected these prices.
Haase et al. (2016) conducted a meta-study of speculative effects on
commodity prices based on 100 publications, confirming that the
number of research papers for and against the harmful impacts of
speculation is approximately equal.

4
J. Guo and T. Tanaka
Fig. 2. Time series plots of the monthly price growth rates.
To eliminate seasonal effects or extreme events, we utilize the
autoregressive integrated moving average method3 to adjust all vari­
ables seasonally. Let Xt denote the variable at month t; the monthly
growth rate (Zt) can be obtained by calculating its first order logarithmic
difference, i.e., Zt = ln (Xt) − ln (Xt− 1). Table 2 contains the summary
statistics and preliminary tests of monthly growth rates for each vari­
able. From Table 2, we find that the means of all the variables are
positive and very close to zero. BFP provides the highest value in terms
of median, while IFP has the lowest value. We can further observe that
NCP exhibits the largest value of standard deviation, indicating the
financial market exhibits more fluctuation than other markets. We also
find that all the variables show a negative skewness, except the AFP.
This result indicates that a longer tail exists on the left side of the
probability density function for all variables except for the AFP. On the
other hand, the high value of kurtosis in each series suggests that the
variables in our study are leptokurtic and have fat tails in the distribu­
tion. Furthermore, the Jarque and Bera (1980) normality test rejects
normality for all variables at a 1% significance level, except for NCP. The
Ljung-Box (Ljung and Box, 1978) Q-statistics show that all variables
3
X-13-ARIMA (autoregressive integrated moving average), provided by the
US Census Bureau, is used for seasonal adjustment.
5
Energy Economics 116 (2022) 106422
exhibit serial correlation in squared series, implying that each variable
has time-varying variance. This points out that employing the TVP-VAR
approach is appropriate to examine the connectedness network among
the variables.
In addition, it must ensure all series are stationary before applying
the TVP-VAR model. The results of the augmented Dickey-Fuller (ADF)
test (Dickey and Fuller, 1979) and Kwiatkowski-Phillips-Schmidt-Shin
(KPSS) (Kwiatkowski et al., 1992) unit root test in Table 3 show that
all variables have unit root processes in their level and that are sta­
tionary in their first differences.
Fig. 2 illustrates the growth rate of each series for the period from
February 2001 to July 2021. Overall, we can see that different variations
of time-varying volatility exists across the variables. It is worth noting
that similar patterns in the fluctuations can be detected during certain
specific periods; for example, the growth rates of BFP and EPI show
substantial variability from 2020 because of the COVID-19 pandemic.
Meanwhile, it is evident that the growth rates of AFP, EPI, and FPI show
more significant fluctuations between 2007 and 2008, which coincided
with the global commodity price spikes of that time. We also note that a
pattern of volatility clustering is evident for NCP, where large growth
rates are always followed by significant volatility.
J. Guo and T. Tanaka
4. Methodology
The connectedness approach developed by Diebold and Yilmaz
(2012, 2014) provides a framework to trace and quantify the intensity
and direction of connectedness across different variables in a system.
However, the two major drawbacks to this approach are the choice of
rolling-window size, and the suboptimal normalization of connected­
ness. In this article, two novel econometric techniques are employed to
accurately investigate the transmission mechanisms across African food
prices, US biofuel production, global energy and food prices, and
financial speculation.
The first one is the standard TVP-VAR connectedness approach, as
proposed by Antonakakis et al. (2020). This method improves on the
original approach by substituting the rolling-window VAR with a TVP-
VAR model, which means that there is no need to arbitrarily choose
the rolling-window size, and the loss of valuable observations is avoided,
so it can be applied to analyze low-frequency or limited time-series data.
Since only the monthly data for US biofuel production and African food
prices are available, the advantages of the TVP-VAR model are appro­
priate for our data set. Furthermore, our data spans over the period from
January 2001 to July 2021, which includes several turbulent times, such
as the dot-com crisis in 2000, the global food and energy prices crisis in
2007–2008, the global financial crisis in 2008, and the COVID-19
pandemic in 2020. The TVP-VAR model is more desirable than other
approaches (i.e., cointegration and causality analysis) to explore the
connectedness across the variables in a time-varying manner, allowing
us to visualize how the role of specific variables within the network of
study may change over time.
The second one is the TVP-VAR extended joint connectedness
approach (Balcilar et al., 2021), which is a refined version of the TVP-
VAR model. This methodology solves the problem of the normaliza­
tion of the original connectedness approach, which is chosen arbitrarily
and may not be reasonable. Firstly, Lastrapes and Wiesen (2021)
devolved the joint connectedness approach in which the normalization
method is dominated by applying a row sum method that links its der­
ivations to the popular goodness-of-fit R2. Then Balcilar et al. (2021)
combined the TVP-VAR model with the joint connectedness approach,
an innovative improvement that not only preserves all the advantages
over the TVP-VAR model, but also provides a more natural and accurate
estimation of connectedness measures based upon the optimal
normalization.
Policymakers in African countries need a way to precisely measure
the strength of the impact of external shocks on domestic food prices in
order to adequately adjust food security strategies. In terms of practi­
cability and forecasting performance, the standard TVP-VAR method
and the TVP-VAR extended joint connectedness approach are appro­
priate methodologies and can substantially alleviate possible misleading
results derived from other alternative models. Therefore, we employ
both models to explore how the interrelation between African food
prices and cross-border factors has evolved over time.
Following Antonakakis et al. (2020), the TVP-VAR model with lag
length p, which is determined by the Bayesian information criterion
(BIC), can be defined as:
Zt = Ξt Yt− 1 + εt , εt |Ωt-1 ∼ (0,Σt ) (1)
υec(Ξt ) = υec(Ξt ) + νt , νt |Ωt-1 ∼ N(0,Φt ) (2)
where Zt is 5 × 1dimensional vectors. Specifically, Zt = (AFPt,
BFPt IEPt IFPt NCPt)′ , in which AFPt is African food prices, BFPt is US
biofuel production, IEPt is international energy price, IFPt is
6
Energy Economics 116 (2022) 106422
international food price and NCPt is non-commercial position at time t,
respectively. Yt¡1 = [Zt¡1, …,Zt¡p]′ is 5p × 1 dimensional vector; εt is the
error vector4;Ξt and Σt are 5 × 5pand 5 × 5 dimensional matrices,
respectively; Ωt¡1 illustrates all the information available until t − 1; υec
(Ξt) and νt are 52p × 1 dimensional vectors, whereas Φt is an 52p × 52p
dimensional matrix.
The standard TVP-VAR framework is based on the H-step ahead
generalized forecast error variance decomposition (GFEVD) introduced
by Koop et al. (1996) and Pesaran and Shin (1998). According to Diebold
and Yilmaz (2012, 2014), the generalized spillover table (gSOTij, t),
which describes the effect that a shock in variable j has on variable i, can
be computed as follows:
θGij,t (H)
gSOT ij,t = ∑n G (3)
j=1 θij,t (H)
The gSOTij, t plays the essential role in the connectedness approach
on which all other connectedness measures can be calculated. Subse­
quently, the total connectedness index (TCI) is computed by the average
total directional connectedness from (to) others and indicates the
magnitude of network interaction. The TCI for the standard TVP-VAR
model, namely TCIG t , can be formulated by the following:
1∑ n
1∑ n
TCI Gt = G,FROM
Si←⋅,t = SG,TO (4)
n i=1 n i=1 i→⋅,t
A high value suggests a high degree of spillover effects, whereas a
low value indicates a low degree of spillover effects in the network. As
pointed out by Caloia et al. (2019), the spillover effect between variables
depends significantly on the normalization of GFEVD. Balcilar et al.
(2021) developed the TVP-VAR extended joint connectedness approach,
based on the joint spillover index suggested by Lastrapes and Wiesen
(2021). Specifically, in this model, the equivalent of SG, FROM
i←⋅, t , which is in
J, FROM
the standard TVP-VAR model, can be represented by Si←⋅, t . Next, the
joint total connectedness index TCIJt for the joint connectedness can be
calculated as follows:
1∑ n
TCI Jt = SJ,FROM (5)
n i=1 i←⋅,t
which is within 0 and 1, as opposed to the TCI of the originally proposed
approach, as shown in Chatziantoniou and Gabauer (2021). The sig­
nificant contribution of Lastrapes and Wiesen (2021) is the introduction
of a multiple scaling parameter γ defined as:
1∑ n J,FROM
Si←⋅,t
γ= γ it , γ it = G,FROM (6)
n i=1 Si←⋅,t
Then, in the research of Balcilar et al. (2021), the scaling parameter
γ it is applied to link the equivalence of gSOTij, tfor the joint connected­
ness approach, namely jSOTij, t to gSOTij, t, as follows:
jSOT ij,t = γ it gSOT ij,t . (7)
One of the advantages of the joint connectedness approach is that it
provides more flexibility, as each row has its own scaling parameter.
For the detailed mathematical derivations of the standard TVP-VAR
model and the TVP-VAR-based extended joint connectedness approach,
interested readers are referred to Appendix A.
5. Empirical results
This section provides the averaged and dynamic connectedness
among African food prices, US biofuel production, global energy and
4
It is assumed that εt has a multivariate normal distribution. Pesaran and
Shin (1998) indicate that when the distribution of the error terms are non-
normal, one should obtain the conditional expections by stochastic simulations.
J. Guo and T. Tanaka Energy Economics 116 (2022) 106422

Table 4
Averaged joint connectedness based on the TVP-VAR extended joint connect­
edness approach.
AFP BFP IEP IFP NCP FROM

AFP 80.16 5.18 2.69 3.16 8.81 19.84

BFP 0.10 88.04 4.92 3.88 3.05 11.96
IEP 0.25 3.76 79.24 15.04 1.71 20.76
IFP 0.17 2.31 10.72 82.47 4.33 17.53
NCP 0.35 0.96 1.20 1.63 95.85 4.15
TO 0.87 12.21 19.54 23.72 17.89 74.24
NET − 18.97 0.26 − 1.22 6.19 13.74 TCI: 14.85

Note: The results are based on a TVP-VAR extended joint connectedness

approach with a lag length of order two (BIC) and a 20-step-ahead GFEVD.

food prices, and financial speculation, based on the standard TVP-VAR

and the TVP-VAR extended joint connectedness approaches.

5.1. Averaged dynamic connectedness measures

Considering the sample period as a whole, we estimate with a 20-
step-ahead GFEVD5 and express, in percentage terms, the averaged
connectedness across variables. As a refined version, the TVP-VAR
extended joint connectedness specification is expected to be more ac­
curate than the standard TVP-VAR model. Thus, we report the averaged
connectedness measures, based on the TVP-VAR extended joint
connectedness approach, in Table 4, in which the diagonal components
capture the own-variable spillovers of shocks, while, the off-diagonal
elements reflect the interaction across variables. The TO row and the
FROM column exhibit total spillovers to and from one specific variable.
Furthermore, the difference between TO and FROM is calculated in row
NET for each variable.
First, from Table 4, we can see that the average TCI in the network is
14.85%, suggesting that, on average, 14.85 of the forecast error variance
within this network of one specific variable can be explained by the
impact of all other variables. Second, regarding row NET, it is clear that
AFP appears to be the largest net receiver, with an average net
connectedness value of − 18.97%. This result indicates that AFP is more
likely to be affected by the other variables. Meanwhile, the negative sign
of the net spillover can also be found in IEP, with a value of − 1.22%.
Third, by contrast, we note that NCP is the largest net transmitter in the
network, with an average net connectedness value of 13.74%. This re­
sults also provides evidence that BFP and IFP are net transmitters of
shocks.
We also present the results of the standard TVP-VAR in Appendix B,
Table A.1. Following Chatziantoniou and Gabauer (2021), we employ
the Minnesota Prior to initialize the Kalman filter and set the forgetting
factor κ1 = κ2 = 0.99 in the standard TVP-VAR model. In general, it can
be observed that the averaged connectedness obtained from the two
different approaches are qualitatively similar, which guarantees the
robustness of our main findings in Table 4. In order to investigate
whether the role played by financial speculation is similar over the short
and long time horizons, we also estimate forecasts for horizons shorter
than 20 months. Specifically, we estimate forecasts for horizons from 1
month to 20 months and obtained qualitatively similar results of aver­
aged connectedness measures based on the different forecast horizons.
We report the results of the averaged joint connectedness based on the
TVP-VAR extended joint connectedness approach with two months
forecast horizon in Appendix B, Table A.2. Comparing the results in
Table 4, we find that NCP remains the largest net transmitter in the
Fig. 3. Network of pairwise static connectedness.
Note: The blue (yellow) nodes illustrate shocks' net transmitter (receiver).
Vertices are weighted by averaged net pairwise directional connected­
ness measures.
network, even with a smaller magnitude of connectedness. This result
adds to the robustness of our analysis and further suggests that the
increased contagion of NCP over the long horizon.
We provide a graph of the static connectedness among variables in
Fig. 3, based on the results shown in Table 4. Fig. 3 represents the net
pairwise transmitting or receiving relationships among the variables by
a static measure, averaging the dynamic net spillover effects between
individual variables. Note that the variables interact with each other,
but an arrow indicates greater directional connectedness after cancelling
out receiving and transmitting impacts. Note, too, that the size of the
nodes shows the weighted average net total directional connectedness,
and bold lines describe a greater spillover effect than fine lines. It is clear
from Fig. 3 that AFP is a net receiver of uncertainty shocks from all the
other variables. Specifically, NCP appears to be the major net trans­
mitter of shocks to AFP, followed by BFP. NCP is also the largest net
transmitter of spillovers to all the other variables, and BFP is the smallest
net transmitter. Interestingly, BFP is a net receiver of shocks from NCP,
IFP, and IEP. In addition, regarding the net directional connectedness
between IFP and IEP, we find that the magnitude of transmission from
IFP to IEP is more robust than that from IEP to IFP. This outcome sug­
gests that IFP has more influence on IEP.
Fig. 3 indicates that all four potential determinants assumed in this
study (i.e., international food and energy prices, biofuel production, and
speculation) behind African food prices drive the local food pricing. The
results suggest that the most significant factor mitigating against African
food prices is arbitrage activities by non-commercial traders at the
Chicago Board of Trade, followed by US biofuel production. In theory,
the two elements do not directly shock local food prices in Africa, but do
so indirectly through various markets, such as the global food and en­
ergy markets. In addition, biofuel production receives more influence
from food-related factors (i.e., international food prices and speculation)
than global energy prices. This may imply that the production cost of
biofuel is a more important determinant than energy prices, at least
during the sample period.
5.2. Dynamic total connectedness index

5
The reason for using a 20-month forecast horizon is that there may be some
lagged time between information on the US biofuel market or the global energy
and food price and African food prices. We are more interested in the dynamic
connectedness between African food prices and the other factors over a long
time span.
Although the results of the averaged connectedness measures pro­
vide an overview of the underlying interrelations in the network, a dy­
namic framework is required that sheds more light on time-varying
connectedness among the variables.
Fig. 4 plots the dynamic TCI that dominates the total connectedness

7
J. Guo and T. Tanaka
Fig. 4. Dynamic total connectedness index.
Note: The results are based on the standard TVP-VAR (red line), the TVP-VAR
extended joint connectedness model (black shaded area) with a lag length of
order two (BIC), and a 20-step-ahead GFEVD. Following Chatziantoniou and
Gabauer (2021), we employ the Minnesota Prior to initialize the Kalman filter
and set the forgetting factor κ1 = κ2 = 0.99 in the standard TVP-VAR model.
evolution based on the TVP-VAR extended joint connectedness approach
(black shaded area) and the standard TVP-VAR model (red line) and
shows periodic peaks and troughs which fluctuated between 10% and
35% over our sample period (February 2001 to July 2021). Specifically,
it is noteworthy that there are three major jumps in connectedness that
occurred in 2001–2002 (over 30%), 2009–2010 (over 15%), and
2020–2021 (over 25%). These results suggests that the high intercon­
nectedness of the network takes place in these periods, and hence the
greater dynamic evolution of the TCI typically corresponds to specific
events. In particular, it would be natural to associate the total connec­
tivity movements with global macroeconomic shocks, since the vari­
ables used in this study are sensitive to international market turbulence.
The bursting of the dot-com bubble, global commodity price spikes, and
the COVID-19 pandemic, likely created the first, second, and third
apexes, which means that the variables become more closely interre­
lated during these periods. Although uncovering the hidden factors is
beyond the scope of this research, one of the possible underlying factors
would be the US dollar index, which steeply declined from the dot-com
bubble bursting to the beginning of 2008, and then sharply rose until the
end of 2008, which seems plausible, especially for the first and second
summits.
5.3. Dynamic total connectedness for “TO all others”, “FROM all
others”, and “NET”
In the next step, we further investigate the specific position of each
variable in the network by classifying the results of dynamic directional
connectedness into “TO all others”, “FROM all others”, and “NET”.
First, Fig. 5 presents the directional connectedness from each vari­
able to all others. Throughout the entire sample period, we see that the
time-varying spillovers from APF to others are extremely low (under
5%). We can also verify that BFP, IEP, and IFP reveal a similar trans­
mission structure during periods of economic and financial turmoil seen
in Fig. 4. For instance, the directional spillover from biofuel production
and international energy prices to other variables surged to 40% during
8
Energy Economics 116 (2022) 106422
2020–2021, which corresponds to the COVID-19 pandemic outbreak.
The largest root cause of these increases in connectedness is likely to be
the widely adopted lockdown policies, designed to prevent coronavirus
from spreading. In reality, US gasoline usage and ethanol production
were approximately halved is this period, and other markets are more
sensitive to such extreme shocks (Irwin, 2020). Moreover, it is worth
noting that, from 2001 to 2003, the NCP contributed to large spillovers
to other variables, then had a noticeable downturn after 2004.
Second, Fig. 6 shows the directional spillovers to each variable from
all the others. We note that AFP was greatly impacted by other variables
significantly differently to that seen in Fig. 5. Specifically, we can see
that the connectedness suffered a dramatic increase from the beginning
of the sample, then rises immediately and reached its peak (over 80%) at
the end of 2001. By contrast, the magnitude of transmission from others
to NCP remains at a relatively low level throughout the sample period.
Fig. 6 also reveals that the directional connectedness of BFP, IEP, and IFP
has a closer downward and upward trend compared to Fig. 5, which
indicates that the three variables played both transmitting and receiving
roles throughout the sample period. It is noteworthy that biofuel pro­
duction and global energy and food prices seem to be synchronized
around the three apexes, as shown in Fig. 4, which implies that the peaks
are not formed for inherent reasons due to each variable, but to global
market jolts.
Third, with the definitions in Eq. (A.4) and Eq. (A.8) (See Appendix
A), the net total directional connectedness can be explained as the dif­
ference between “TO all others” and “FROM all others”. The examina­
tion of net total directional connectedness allows us to distinguish
whether a specific variable is a net transmitter or a net receiver of un­
certainty shocks over time. We illustrate directional connectedness for
“NET” in Fig. 7, from which it is evident that AFP is a persistent net
receiver of spillover shocks, and particularly large values below zero
(over − 90%) are seen between 2001 and 2003. Subsequently, the
spillover effects from other variables to AFP decreased gradually with
time, and then showed a noticeable increase during the COVID-19 crisis.
It is also worth mentioning that NCP plays a significant net transmitting
role in the network, especially in the period from 2001 to 2004. This
suggests that investors' positions conveyed significant shocks to other
variables in the first half of the 2000s that dwindle as time passes.
Interestingly, we find that NCP switches into a net receiving position
after the outbreak of the COVID-19 pandemic, hinting that speculative
activities assumed a net receiving role in relation to other variables
during this period. On the other hand, IFP is a persistent net transmitter
of shocks, except for in several specific short periods. Our results also
suggest that BFP and IEP play either the net receiving or the net trans­
mitting roles over time. Specifically, the net connectedness of BFP
fluctuated between positive and negative regions throughout the period,
with relatively lower magnitude than other variables. Finally, we can
identify that IEP changes from being a transmitter to a net receiver after
2009, coinciding precisely with the 2008 global commodity price spikes.
5.4. Dynamic net pairwise directional connectedness
Finally, we focus on the results of time-varying net pairwise
connectedness. This measure helps us to further understand the dynamic
connectedness between two specific variables and to present beneficial
information on net transmitters or receivers. Fig. 8 describes the level of
connectedness across all pairs in the network.
First, we look at the bilateral interaction between AFP and all other
variables, depicted in the left hand column of Fig. 8. Understandably, we
detect that AFP is a net receiver, impacted by other variables. It is
particularly noteworthy that biofuel production substantially influenced
African food prices for the entire period. Interestingly, we find that
biofuel production transmitted more shocks to African food prices than
global energy and food prices, which suggests that biofuel production
plays a dominant role as a net transmitter of uncertainty shocks to Af­
rican food prices. There are a number of similar time-varying
J. Guo and T. Tanaka
Fig. 5. Dynamic directional connectedness “TO all others”.
Note: The results are based on the standard TVP-VAR (red line), the TVP-VAR extended joint connectedness model (black shaded area) with a lag length of order two
(BIC), and a 20-step-ahead GFEVD. Following Chatziantoniou and Gabauer (2021), we employ the Minnesota Prior to initialize the Kalman filter and set the
forgetting factor κ1 = κ2 = 0.99 in the standard TVP-VAR model.
characteristics between IEP-AFP and IFP-AFP, such as global energy and
food prices transmitting greater spillover effects to African food prices
during specific times of crisis s (as evidenced in Fig. 4). Meanwhile, in
the case of NCP-AFP, we find that the transactions of non-commercial
futures traders significantly affect food prices in Africa, particularly
from 2001 to 2012. Specifically, the connectedness is exceptionally high
in the period 2001–2005; however, it declined tremendously after 2012.
One possible interpretation for this finding is the depreciation of the US
dollar from 2001 to 2012. The US dollar is the key global currency used
for international trade, and the prices of most commodities are quoted I
US dollars. Therefore, a weak US dollar leads to high commodity prices
in those markets, which encourages investors, particularly in the US, to
take long positions that boost commodity prices further, since their
performance is assessed in US dollars. Investors in the rest of the world
are then also stimulated to buy commodities, predicting the price in­
creases caused by US speculators that lead to even higher prices,
incentivizing US speculators to purchase the commodities. The repeti­
tion of the process spikes commodity prices. Despite the fact that the
local currencies of importers relatively appreciate against the US dollar,
which helps importing countries to procure foreign foods, international
price rises by the above self-reinforcement process exceeds the effect of
the appreciation of local currencies. Furthermore, the magnitude of
9
Energy Economics 116 (2022) 106422
transmission from NCP to AFP appears to be larger than that of US
biofuel production or international energy and food prices in the period
prior to 2009.
Second, we focus on the net pairwise connectedness between BFP
and other variables. Notably, the connectedness of IEP-BFP and IFP-BFP
share common features. As expected, international food and energy
prices persistently transmitted shocks to US biofuel production for the
entire period, except in several short, specific periods. By contrast, the
NCP-BFP panel in Fig. 8 indicates that NCP had a relatively larger net
transmitting role during 2001–2004. NCP then exhibits a net receiving
position in 2020–2021, coinciding with the COVID-19 pandemic at the
start of 2020.
Third, we turn our attention to the remaining pairwise relationships
in Fig. 8. From the plot of IFP-IEP, it is interesting to find that IEP is the
primary transmitter, whereas IFP is the net receiver before 2008. Af­
terwards, the direction of transmission is reversed so that IFP becomes
the net transmitter around the beginning of 2008. On the other hand, in
the case of NCP-IEP, it is evident that these two variables switch between
net transmitting and net receiving roles over time, and the spillover
effects are relatively low. Finally, our results show that NCP is a net
transmitter, whereas IFP is a net recipient during all periods under ex­
amination. It would be reasonable to assume that financial speculation
J. Guo and T. Tanaka
Fig. 6. Dynamic directional connectedness “FROM all others”.
Note: The results are based on the standard TVP-VAR (red line), the TVP-VAR extended joint connectedness model (black shaded area) with a lag length of order two
(BIC), and a 20-step-ahead GFEVD. Following Chatziantoniou and Gabauer (2021), we employ the Minnesota Prior to initialize the Kalman filter and set the
forgetting factor κ1 = κ2 = 0.99 in the standard TVP-VAR model.
in agricultural commodities constantly affects global food prices
throughout our sample period.
In summary, it is vital to note that the empirical results obtained
from the two different approaches are qualitatively similar, which
guarantees the robustness of our main findings in this study.
6. Conclusion
We uncover the inter-connectivity mechanisms of cross-border fac­
tors and food prices in Africa using a standard TVP-VAR model and the
TVP-VAR extended joint connectedness approach. We obtain robust
results, based on the two different approaches, which gives more cred­
ibility to our conclusions about the underlying connectedness. The pri­
mary contributions are composed of empirical and methodological
elements and, to our knowledge, there are no studies that conduct a
comprehensive analysis of identifying the relationship mechanism of the
cross-border factors that drive African food prices with a reliable
quantitative method. Despite the global attention on food security and
climate change mitigation, the impacts of biofuel production on African
food prices have been scarcely quantified.
Our main findings can be summarized as follows.
10
Energy Economics 116 (2022) 106422
(1) According to the averaged connectedness analysis, the results
confirm that speculative activities and biofuel production have a
greater influence on African food prices than other overseas
factors.
(2) The results of the dynamic total connectedness index indicate
that surges in the connectedness network correspond to specific
crisis events, including the 2000 dot-com bubble bursting, the
global commodity price spikes in 2007–2008, and the COVID-19
pandemic in 2020.
(3) Following the pairwise connectedness results, we identify that
arbitrage transactions were predominant in transmitting consid­
erable shocks to African food prices between 2001 and 2012,
while biofuel production more constantly affected prices
throughout the sample period, including the recent pandemic in
2020.
(4) US biofuel production persistently received shocks from global
food and energy prices, but not the other way around.
Policy implications can be drawn based on these outcomes. Our ex­
periments show that transactions by non-commercial futures traders
play the most significant role in contributing to local food prices in Af­
rica. A transaction tax, the so-called the Tobin tax, would effectively
J. Guo and T. Tanaka
Fig. 7. Dynamic net total directional connectedness.
Note: The results are based on the standard TVP-VAR (red line), the TVP-VAR extended joint connectedness model (black shaded area) with a lag length of order two
(BIC), and a 20-step-ahead GFEVD. Following Chatziantoniou and Gabauer (2021), we employ the Minnesota Prior to initialize the Kalman filter and set the
forgetting factor κ1 = κ2 = 0.99 in the standard TVP-VAR model.
dampen speculative activity and price volatility. We find that biofuel,
made mainly from corn and soybean in the US, affected African food
prices. The corn consumption of the African population is huge in
several countries, accounting, for example, for 48.7%, 44.9% and 38.1%
of calorie intake per capita in Lesotho, Malawi and Zimbabwe, respec­
tively (FAOSTAT). It is therefore essential to prudently select feedstock
materials to reduce food price rises and prevent civil protests in Africa.
Policy implications can be drawn based on these outcomes. Our ex­
periments show that transactions by non-commercial futures traders
play the most significant role in contributing to local food prices in Af­
rica. A transaction tax, the so-called the Tobin tax, would effectively
dampen speculative activity and price volatility. We find that biofuel,
made mainly from corn and soybean in the US, affected African food
prices. The corn consumption of the African population is huge in
several countries, accounting, for example, for 48.7%, 44.9% and 38.1%
of calorie intake per capita in Lesotho, Malawi and Zimbabwe, respec­
tively (FAOSTAT). It is therefore essential to prudently select feedstock
materials to reduce food price rises and prevent civil protests in Africa.
In addition, a food self-sufficiency policy could buffer price volatility
transmissions from international markets, as existing research suggests
(Guo and Tanaka, 2019, 2020; Tanaka and Guo, 2020; Tanaka, 2018;
Guo and Tanaka, 2022a).
11
Energy Economics 116 (2022) 106422
A limitation of the analysis is that we quantify the transmitted effects
of US biofuels only, and not the world's biofuel production. Encom­
passing biofuel production by other countries such as Brazil, Indonesia,
and the EU may change the results, so the connection between biofuel
and global and African food prices could be reinforced. It is feasible that
the net directionality between biofuel production and world energy
prices might reverse.
Research that analyzes shock transmissions between African and
external markets is evidently scarce in comparison with studies that
identify domestic factors, even though the topic is becoming more
important due to globalization that facilitates cross-border spillover
effects. Simultaneous occurrence of civil violence in African countries
during the global food crisis around 2008 indicates that the food riots
were primarily driven by foreign factors, with some local causes.
However, most research efforts have been directed toward domestic
factors to explain food market fluctuations in Africa. This issue should be
analyzed, particularly using formal quantitative methods.
Submission declaration and verification
This work is approved by all authors and has not been published nor
is under consideration for publication elsewhere.
J. Guo and T. Tanaka Energy Economics 116 (2022) 106422

Fig. 8. Dynamic net pairwise directional connectedness.

Note: The results are based on the standard TVP-VAR (red line), the TVP-VAR extended joint connectedness model (black shaded area) with a lag length of order two
(BIC), and a 20-step-ahead GFEVD. Following Chatziantoniou and Gabauer (2021), we employ the Minnesota Prior to initialize the Kalman filter and set the
forgetting factor κ1 = κ2 = 0.99 in the standard TVP-VAR model.

CRediT authorship contribution statement Data availability

Jin Guo: Methodology, Software, Investigation, Writing – original
draft, Formal analysis, Visualization, Project administration, Funding
acquisition, Writing – review & editing. Tetsuji Tanaka: Conceptuali­
zation, Data curation, Writing – original draft, Writing – review &
editing, Investigation.
Declaration of Competing Interest
The authors declare that they have no known competing financial
interests or personal relationships that could have appeared to influence
the work reported in this paper.
Datasets related to this article can be obtained from the authors on
request.
Acknowledgments
This paper was written with the financial support from Japan Society
for the Promotion of Science [grant number 21K05805]. We also thank
Ana-Maria Ignat for proofreading, formatting, and miscellaneous
research supports.

Appendix A

Following the work of Diebold and Yilmaz (2012, 2014), we need to transform Eq. (1) of the TVP-VAR to the TVP-VMA model by the Wold
∑∞
representation theorem Zt = h=0Γh, tεt¡iwhere Γ0 = In. Subsequently, the H-step forecast error can be formulated as Λt (H) = Zt+H −
∑H− 1
E(Zt+H |Zt , Zt− 1 , ⋯ ) = h=0 Γh,t εt+H− h with a forecast error covariance matrix equal to E(Λt(H)Λ't(H)) = Γh, tΣtΓ'h, t. Following Koop et al. (1996) and
Pesaran and Shin (1998), we define the H-step ahead GREVD as:

12
J. Guo and T. Tanaka Energy Economics 116 (2022) 106422

( ) [ ( )⃒ ]2
E Λ2i,t (H) − E Λi,t (H) − E Λi,t (H) ⃒εj,t+1 , …, εj,t+H
G
θij,t (H) = ( )
E Λ2it (H)
∑H− 1 ( ' )2
ξi Γht Σt ξj
=( )h=0
∑H− 1 ( ' ) (A.1)
ξ'j Σt ξj '
h=0 ξi Γht Σt Γht ξi

∑n G
where θGij, t(H) is the unscaled GFEVD ( j=1θij, t(H) ∕
= 1) and ξi is an 5 × 1 zero selection vector with unity at its ith position. The unscaled GREVD can be
normalized to unity by dividing it by the row sum, which leads to the scaled GFEVD (gSOTij, t). The total “FROM all others” directional connectedness
describes the effect all variables have on variable i; meanwhile, the total “TO all others” directional connectedness constitutes the effect variable i has
on all others. These two connectedness measures can be written as:
∑
n
G,FROM
Si←⋅,t = gSOT ij,t (A.2)
j=1,i∕
=j

and
∑
n
G,TO
Si→⋅,t = gSOT ji,t (A.3)
j=1,i∕
=j

Next, by computing the difference between Eq. (A. 2) and Eq. (A. 3), the net total directional connectedness of variable i, which demonstrates the
net influence of variable ion the network, can be written as:
G,NET
Si,t G,TO
= Si→⋅,t G,FROM
− Si←⋅,t (A.4)

If SG,
i, t
NET
> 0(SG, NET
< 0), variable i is a net transmitter (receiver) of shocks implying that variable i is driving (driven by) the network.
i, t
Furthermore, for a closer look into the disaggregated level, we can identify the bilateral net directional connectedness of two variables by using net
pairwise directional connectedness, defined by:
G,NET
Sij,t = gSOT G,TO
ji,t − gSOT G,FROM
ij,t (A.5)

Here, if SG, NET

ij, t > 0(SG,
ij, t
NET
< 0), variable i dominates (is dominated by) variable j, indicating that variable i affects (is affected by) variable j more
than the other way around. Following Balcilar et al. (2021), in the TVP-VAR extended joint connectedness approach, the equivalent of SG, FROM
i←⋅, t , which
J, FROM
is in the standard TVP-VAR model, can be represented by Si←⋅, t as follows:
( ) [ ( )⃒ ]2
E Λ2i,t (H) − E Λi,t (H) − E Λi,t (H) ⃒ε∀∕ =i,t+1 , …, ε∀∕
=i,t+H
J,FROM
Si←⋅,t = ( 2 )
E Λit (H)
∑H− 1 ' ( ' )
' − 1 '
h=0 ξi Γht Σt N i Ni Σt N i Ni Σt Γ'ht ξi
= ∑H− 1 ' '
(A.6)
h=0 ξi Γht Σt Γht ξi

where Ni is an 5 × 5 − 1 rectangular matrix that equals the identity matrix with the ith column eliminated, and ε∀∕ =i, t+1 denotes the 5 − 1-dimensional
vector of shocks at time t + 1 for all variables except variable i. It is noteworthy that, in contrast to the original connectedness approach, no
normalization is needed to guarantee that the spillovers are within 0 and 1. Based on this definition of Eq. (7), we can compute the equivalent of SG, TO
i→⋅, t
J, TO
for the joint connectedness. The total directional connectedness form variable i to all others, namely Si→⋅, t, is calculated as well:
∑
n
J,TO
Si→⋅,t = jSOT ji,t (A.7)
j=1,j∕
=i

Finally, in the same fashion as in the original connectedness approach, the net total directional and net pairwise directional measures, defined in
the joint connectedness, take the following form:
J,NET
Si,t J,TO
= Si→⋅,t J,FROM
− Si←⋅,t (A.8)

J,NET
Sij,t = jSOT J,TO J,FROM
ji,t − jSOT ij,t (A.9)

Appendix B
Table A.1
Averaged joint connectedness based on the standard TVP-VAR approach.

AFP BFP IEP IFP NCP FROM

AFP 79.79 5.28 2.79 3.25 8.89 20.21

BFP 0.11 86.52 5.51 4.48 3.38 13.48
IEP 0.24 3.51 80.69 13.97 1.59 19.31
IFP 0.17 2.32 10.26 83.18 4.07 16.82
(continued on next page)

13
J. Guo and T. Tanaka Energy Economics 116 (2022) 106422

Table A.1 (continued )

AFP BFP IEP IFP NCP FROM

NCP 0.34 0.99 1.23 1.56 95.88 4.12

TO 0.85 12.11 19.79 23.26 17.93 73.94
NET − 19.36 − 1.37 0.48 6.44 13.81 TCI: 14.79
Note: The results are based on the standard TVP-VAR approach with a lag length of order two (BIC) and a 20-step-ahead GFEVD. Following Chatziantoniou
and Gabauer (2021), we employ the Minnesota Prior to initialize the Kalman filter and set the forgetting factor κ1 = κ2 = 0.99.

Table A.2
Averaged joint connectedness based on the TVP-VAR extended joint connectedness approach with two month forecast horizon.

AFP BFP IEP IFP NCP FROM

AFP 85.17 4.45 2.07 0.86 7.45 14.83

BFP 0.1 90.89 3.83 2.74 2.44 9.11
IEP 0.25 2.53 83.45 12.93 0.85 16.55
IFP 0.16 2.03 10.2 84.01 3.59 15.99
NCP 0.35 0.8 1.06 1.53 96.25 3.75
TO 0.87 9.81 17.16 18.05 14.33 60.23
NET − 13.96 0.7 0.61 2.06 10.58 TCI: 12.05
Note: The results are based on a TVP-VAR extended joint connectedness approach with a lag length of order two (BIC) and a 2-step-ahead GFEVD.

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