Analyzing the impact of macroeconomic variables on agricultural derivatives performance in the SAFEX market
DOI:
https://doi.org/10.37075/FABA.2025.1.02Keywords:
Macroeconomic factors, Agricultural derivatives, White maize futures, Market volatility, Risk management, ARDL, South AfricaAbstract
Purpose: This research study investigates how macroeconomic factors, such as short-term and long-term interest rates, the real exchange rate, and GDP growth, influence the pricing and volatility of agricultural derivatives, specifically focusing on white maize futures and options traded in South Africa. Agricultural derivatives are crucial for managing price risks in a country where agriculture plays a vital economic role.
Design/Methodology/Approach: The study employs a quantitative research approach using secondary data from 2000 to 2023 sourced from reliable institutions like the South African Reserve Bank (SARB), Statistics South Africa, and the Johannesburg Stock Exchange (JSE). The Autoregressive Distributed Lag (ARDL) model is applied to evaluate both short-term and long-term relationships between the selected macroeconomic variables and derivative performance. Additionally, unit root tests (ADF and PP) are conducted to assess data stationarity, and diagnostic tests are used to verify the reliability of the results.
Findings: The study highlights the dynamic interplay between macroeconomic factors and agricultural markets, suggesting that macroeconomic shifts, particularly during periods of economic instability, can substantially affect market volatility and risk management strategies.
Practical Implications: The research contributes valuable insights for policymakers, investors, and stakeholders by offering practical implications for improving market efficiency, managing risks, and enhancing agricultural policy formulation in South Africa. It emphasizes the need for effective risk management strategies in the face of changing macroeconomic conditions to ensure market stability and sustainability.
Originality/Value: This study provides new insights into the relationship between macroeconomic factors and agricultural derivatives in South Africa, particularly during periods of economic instability. The findings offer significant contributions for policymakers and market participants in improving risk management strategies and market efficiency.
Paper Type: Research Paper
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