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Interdependencies between Biofuel, Fuel and Food Prices: The Case of the Brazilian Ethanol Market

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  • Deborah Bentivoglio

    (Department of Agricultural, Food and Environmental Sciences (D3A), Università Politecnica delle Marche, Via Brecce Bianche, Ancona 60131, Italy)

  • Adele Finco

    (Department of Agricultural, Food and Environmental Sciences (D3A), Università Politecnica delle Marche, Via Brecce Bianche, Ancona 60131, Italy)

  • Mirian Rumenos Piedade Bacchi

    (Departamento de Economia Administração e Sociologia, Escola Superior de Agricultura Luiz de Queiroz, Universidade de São Paulo, Av. Pádua Dias 11, Piracicaba, São Paulo 13400-970, Brazil)

Abstract

Brazil is currently the world’s largest sugar producer and exporter, as well as the world’s largest producer and consumer of sugarcane ethanol as a transportation fuel. The growth of this market originates from a combination of government policies and technological change, in both the sugarcane ethanol processing sector and the manufacture of flex-fuel vehicles. In recent years however, ethanol production has been questioned due to its possible impact on food prices. The present paper aims to explore the impact of Brazilian ethanol prices on sugar and gasoline prices. The relationships between a times series of these prices are investigated using a Vector Error Correction Model (VECM), supported by Granger Causality tests. In addition, Impulse Response Functions (IRFs) and Forecast Error Variance Decompositions (FEVD) are computed in order to investigate the dynamic interrelationships within these series. Our results suggest that ethanol prices are affected by both food and fuel prices, but that there is no strong evidence that changes in ethanol prices have an impact on food prices.

Suggested Citation

  • Deborah Bentivoglio & Adele Finco & Mirian Rumenos Piedade Bacchi, 2016. "Interdependencies between Biofuel, Fuel and Food Prices: The Case of the Brazilian Ethanol Market," Energies, MDPI, vol. 9(6), pages 1-16, June.
    • Handle: RePEc:gam:jeners:v:9:y:2016:i:6:p:464-:d:72185
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