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Vegetable oil market and biofuel policy: An asymmetric cointegration approach

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  • Peri, Massimo
  • Baldi, Lucia

Abstract

The present paper analyses the long-run relationship between vegetable oil prices and conventional diesel prices in the EU for the period 2005-2007. We applied recent developments in the threshold cointegration approach to investigate the presence of asymmetric dynamic adjusting processes between the prices of rapeseed oil, sunflower oil, and soybean oil, and the price of a mineral oil: diesel. The results presented suggest a two-regime threshold cointegration model only for the rapeseed oil-diesel price pair. Thus, the rapeseed oil price adjusts rapidly to its long-run equilibrium, determined by fossil diesel prices, but this adjustment is asymmetric: it differs if the divergence between the two prices is above or below a critical threshold. Consequently, rapeseed oil appears particularly exposed to external shocks deriving from global political scenarios, suggesting the reassessment of the high quota (80%) of EU biodiesel represented by this vegetable oil.

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Bibliographic Info

Article provided by Elsevier in its journal Energy Economics.

Volume (Year): 32 (2010)
Issue (Month): 3 (May)
Pages: 687-693

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Handle: RePEc:eee:eneeco:v:32:y:2010:i:3:p:687-693

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Keywords: Vegetable oils market Biofuel policy Diesel price Threshold cointegration European Union;

References

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Citations

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Cited by:
  1. Natanelov, Valeri & Alam, Mohammad J. & McKenzie, Andrew M. & Van Huylenbroeck, Guido, 2011. "Is there co-movement of agricultural commodities futures prices and crude oil?," Energy Policy, Elsevier, vol. 39(9), pages 4971-4984, September.
  2. Janda, Karel & Kristoufek, Ladislav & Zilberman, David, 2011. "Biofuels: Review of Policies and Impacts," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt5v1112qr, Department of Agricultural & Resource Economics, UC Berkeley.
  3. Kentaka Aruga & Shunsuke Managi, 2013. "Linkages among the US energy futures markets," International Journal of Global Energy Issues, Inderscience Enterprises Ltd, vol. 36(1), pages 13-26.
  4. Emmanuel Anoruo, 2011. "Testing for Linear and Nonlinear Causality between Crude Oil Price Changes and Stock Market Returns," International Journal of Economic Sciences and Applied Research (IJESAR), Technological Educational Institute (TEI) of Kavala, Greece, vol. 4(3), pages 75-92, December.
  5. Peter Sephton & Janelle Mann, 2013. "Threshold Cointegration: Model Selection with an Application," Journal of Economics and Econometrics, Economics and Econometrics Research Institute (EERI), Brussels, vol. 56(2), pages 54-77.
  6. Pede, Valerien O. & Valera, Harold Glenn A. & Alam, Mohammad Jahangir & McKenzie, Andrew M., 2013. "Nonlinearities in Regional Rice Prices in the Philippines: Evidence from a Smooth Transition Autoregressive (STAR) Approach," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150246, Agricultural and Applied Economics Association.
  7. Serra, Teresa & Zilberman, David, 2013. "Biofuel-related price transmission literature: A review," Energy Economics, Elsevier, vol. 37(C), pages 141-151.
  8. Kristoufek, Ladislav & Janda, Karel & Zilberman, David, 2012. "Relationship Between Prices of Food, Fuel and Biofuel," 131st Seminar, September 18-19, 2012, Prague, Czech Republic 135793, European Association of Agricultural Economists.
  9. Zafeiriou, Eleni & Arabatzis, Garyfallos & Koutroumanidis, Theodoros, 2011. "The fuelwood market in Greece: An empirical approach," Renewable and Sustainable Energy Reviews, Elsevier, vol. 15(6), pages 3008-3018, August.
  10. Mann, Janelle M, 2013. "Is there a Global Relationship Across Crude Oil Benchmarks?," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150368, Agricultural and Applied Economics Association.
  11. Karel Janda & Ladislav Kristoufek & David Zilberman, 2011. "Modeling the Environmental and Socio-Economic Impacts of Biofuels," Working Papers IES 2011/33, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Oct 2011.
  12. Kristoufek, Ladislav & Janda, Karel & Zilberman, David, 2012. "Correlations between biofuels and related commodities before and during the food crisis: A taxonomy perspective," Energy Economics, Elsevier, vol. 34(5), pages 1380-1391.
  13. Lin, Xiaoqiang & Tang, Zhenpeng & Fei, Fangyu, 2013. "Testing for relationships between Shanghai and Shenzhen stock markets: A threshold cointegration perspective," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(18), pages 4064-4074.
  14. Peri, Massimo & Baldi, Lucia, 2013. "The effect of biofuel policies on feedstock market: Empirical evidence for rapeseed oil prices in EU," Resource and Energy Economics, Elsevier, vol. 35(1), pages 18-37.
  15. Natanelov, Valeri & Alam, Mohammad Jahangir & McKenzie, Andrew M. & Van Huylenbroeck, Guido, 2011. "Is There Co-Movement of Agricultural Commodities Futures Prices and Crude Oil?," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114626, European Association of Agricultural Economists.

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