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Do energy prices stimulate food price volatility? Examining volatility transmission between US oil, ethanol and corn markets

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  • Hernandez, Manuel A.
  • Gardebroek, Cornelis

Abstract

This paper examines volatility transmission in oil, ethanol and corn prices in the United States between 1997 and 2011. We follow a multivariate GARCH approach to evaluate the level of interdependence and the dynamics of volatility across these markets. The estimation results indicate a higher interaction between ethanol and corn markets in recent years, particularly after 2006 when ethanol became the sole alternative oxygenate for gasoline. We only observe, however, significant volatility spillovers from corn to ethanol prices but not the converse. We also do not find major cross-volatility effects from oil to corn markets. The results do not provide evidence of volatility in energy markets stimulating price volatility in grain markets.

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Bibliographic Info

Paper provided by Agricultural and Applied Economics Association in its series 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington with number 124583.

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Date of creation: 01 Jun 2012
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Handle: RePEc:ags:aaea12:124583

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Keywords: Volatility transmission; biofuels; corn; MGARCH; Demand and Price Analysis; Financial Economics; Q42; Q11; C32;

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Cited by:
  1. Götz, Linde & Goychuk, Kateryna & Glauben, Thomas & Meyers, William H., 2013. "Export Restrictions and Market Uncertainty: Evidence from the Analysis of Price Volatility in the Ukrainian Wheat Market," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150308, Agricultural and Applied Economics Association.
  2. Nicole Condon & Heather Klemick & Ann Wolverton, 2013. "Impacts of Ethanol Policy on Corn Prices: A Review and Meta-Analysis of Recent Evidence," NCEE Working Paper Series 201305, National Center for Environmental Economics, U.S. Environmental Protection Agency, revised Oct 2013.
  3. repec:fpr:export:1344 is not listed on IDEAS
  4. Gardebroek, Cornelis & Hernandez, Manuel A. & Robles, Miguel, 2014. "Market interdependence and volatility transmission among major crops:," IFPRI discussion papers 1344, International Food Policy Research Institute (IFPRI).
  5. Zhang, Dengjun & Asche, Frank & Oglend, Atle, 2014. "Ethanol and trade: An analysis of price transmission in the US market," Energy Economics, Elsevier, vol. 42(C), pages 1-8.
  6. Papież, Monika, 2014. "A dynamic analysis of causality between prices of corn, crude oil and ethanol," MPRA Paper 56540, University Library of Munich, Germany.
  7. Walid Mensi & Shawkat Hammoudeh & Duc Khuong Nguyen & Seong-Min Yoon, 2014. "Dynamic spillovers among major energy and cereal commodity prices," Working Papers 2014-160, Department of Research, Ipag Business School.
  8. Haixia, Wu & Shiping, Li, 2013. "Volatility spillovers in China’s crude oil, corn and fuel ethanol markets," Energy Policy, Elsevier, vol. 62(C), pages 878-886.

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