This study examines the time-varying Granger causality relationship between geopolitical risks and economic policy uncertainties with energy and food prices using the time-varying Granger causality procedure proposed. The global geopolitical risk index (GPR) and the global economic policy uncertainty index (GEPU) were associated with the FAO food price index (FFPI) and global energy price index (GEPI) variables representing the basket prices of traded agricultural and energy commodities. According to the findings obtained with the recursive evolution procedure, no evidence was found for the existence of time-varying Granger causality between GPR-GEPI and GPR-FFPI. The findings obtained from the recursive evolving procedure, which is a current approach, differ from the findings of previous studies based on the rolling window method. The study presents evidence of causal relationships between GEPU, FFPI, and GPI. However, these causalities are valid for short time intervals. In addition, as a result of the causality test conducted for the relationship between GEPI and FFPI, evidence in favor of time-varying bi-directional causality between the variables is determined. The results suggest that global geopolitical risks are not a precursor to fluctuations in food and energy commodity prices. In this respect, it is argued that food and energy commodities can be safe instruments for investors in periods of geopolitical risk. There is evidence that economic policy uncertainties Granger-cause food and energy prices in some limited periods. To protect investors during periods of global economic policy uncertainty and prevent pass-through to domestic inflation, uncertainty-resistant long-term trade agreements, agricultural production support, tax advantages in international trade, and more investment in renewable energy alternatives that reduce foreign dependency are recommended.
Çeli̇k et al. (Thu,) studied this question.