VOLATILITY SPILLOVER EFFECTS IN THE EXTRA VIRGIN OLIVE OIL MARKETS OF THE MEDITERRANEAN

The objective of this study is to assess the existence and magnitude of volatility spillovers between the extra virgin olive oil markets of Italy, Spain and Greece. These three Mediterranean countries are responsible for 95% of olive oil production within the European Union and they account for more than 50% of olive oil exports worldwide. In order to measure the degree of volatility transmission between these countries we estimate a vector error correction model along with the BEKK parameterization of a Multivariate Generalized Conditional Autoregressive Heteroskedasticity (M-GARCH) model. The empirical results reveal the presence of ARCH and GARCH effects suggesting this way the existence of volatility spillovers between the extra virgin olive oil markets of Italy, Greece and Spain. ARCH effects are the biggest in magnitude for the market between Spain and Italy. GARCH effects are the biggest in magnitude for the market between Greece and Italy.