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Analyzing the impacts of foreign exchange and oil price on biofuel commodity futures

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  • Chiang, Shu-Mei
  • Chen, Chun-Da
  • Huang, Chien-Ming

Abstract

This paper employs an ARJI-trend model that combines the autoregressive jump intensity (ARJI) and component models to analyze the effects of the U.S. dollar index and oil prices on the dynamic properties of biofuel-related commodity futures. The results show that the ARJI-trend model not only provides a better fit for the data on the volatility dynamics of corn, soybean, and wheat futures, but also performs better in terms of out-of-sample forecasting. The U.S. dollar index and oil prices both generate significant impacts on the returns of the futures. Since the coexistence of permanent component, transitory component, and time-varying jumps are observed in those futures, the ARJI-trend model is beneficial for acquiring a better understanding of the differential attributes among corn, soybean, and wheat futures.

Suggested Citation

  • Chiang, Shu-Mei & Chen, Chun-Da & Huang, Chien-Ming, 2019. "Analyzing the impacts of foreign exchange and oil price on biofuel commodity futures," Journal of International Money and Finance, Elsevier, vol. 96(C), pages 37-48.
    • Handle: RePEc:eee:jimfin:v:96:y:2019:i:c:p:37-48
    DOI: 10.1016/j.jimonfin.2019.04.007
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