The Effects of Oil Price Volatility on Private Investment in agriculture Sector

The main objective of the present study is to investigate the effect of oil price volatility on private investment in the agricultural sector. To do this, the annual data of the period 1961-2011 is used. First, the volatility index of oil prices is estimated through the generalized autoregressive conditional heteroskedasticity (GARCH) model and the interactive correlations of the model variables is determined using vector Error Correction model (VECM) and then the long-run correlations between the variables are specified using Johansson's cointegration method. The results indicate that oil price volatility, which is the main objective of the present study, has a negative impact on private investment in the long term. And in the long term, each unit increase in the volatility of oil prices (with the assumption of stability of other explanatory variables of the model) would cause 0.93units of negative impact on agriculture sector.