Meanwhile, α3 captures the long run relation between food price and oil price reduction.
Meanwhile, the long run relation between oil price reduction and the food price is absent.
Thus, the long run relation as represented by (1) reflects asymmetric long-run oil price pass-through to the food price.
Hence, in this setting, in addition to the asymmetric long run relation, the asymmetric short-run influences of oil price changes on food price inflation are also captured.
Based on the above formulation, the long run relation between food price and oil price increases is α2, which is expected to be positive.
Moreover, as can be further noted from the Table, the long run relation between food price and oil price reduction is insignificant.
Turning to our main theme, we note the asymmetric long run relation between the food price and oil price with the increase in oil price being significantly related to the food price while the reduction in oil price not.
Professor Aumann built on Professor Schelling's work to analyse so-called infinitely repeated games and identify what outcomes can be upheld over time in long-run relations.
While the techniques enable evaluation of their long-run relations as well as their short-run interactions, they presume symmetric relations between agricultural prices and oil price.
For this purpose, we use a century of data (1911 2010), to capture the process of development better compared to short sample-based research; and the concept of co-summability, which is designed to analyze non-linear long-run relations among persistent processes.
To address this, we applied the Phillips Hansen fully modified regression to estimate the parameter of the long-run relation.
