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Biofuel substitution in the U.S. transportation sector

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  • Hossain, A. K. M. Nurul
  • Serletis, Apostolos

Abstract

We investigate biofuel substitution in the U.S. transportation sector, for the period from 1990 to 2017, using the normalized quadratic model. We relax the homoskedasticity assumption and instead assume that the covariance matrix of the errors of the flexible demand system is time-varying. We generate inference consistent with neoclassical microeconomic theory and the data generating process. Our results show that there is a small, but statistically significant substitution possibility between biofuel and natural gas, as well as between biofuel and oil, when the prices of fossil fuels change.

Suggested Citation

  • Hossain, A. K. M. Nurul & Serletis, Apostolos, 2020. "Biofuel substitution in the U.S. transportation sector," The Journal of Economic Asymmetries, Elsevier, vol. 22(C).
    • Handle: RePEc:eee:joecas:v:22:y:2020:i:c:s1703494920300086
    DOI: 10.1016/j.jeca.2020.e00161
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    Cited by:

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    More about this item

    Keywords

    Biofuels; Interfuel substitution; Normalized quadratic;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

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