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Biodiesel and vegetable oil market in European Union: some evidences from threshold cointegration analysis

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  • Peri, Massimo
  • Baldi, Lucia

Abstract

In this paper we analyse the long-run relationships between vegetable oils prices and conventional diesel price in EU during the period 2005- 2007. We utilise recent developments on threshold cointegration approach to investigate if asymmetric dynamic adjusting processes exist among rapeseed oil, sunflower oil, soybean oil and diesel prices. The results suggest that the two-regime threshold cointegration model exist only in favour of rapeseed oil-diesel price pair. Therefore, this vegetable oil price adjusts rapidly to its long run equilibrium, determined by fossil diesel prices, in an asymmetric manner when the divergence between the two prices is above a critical threshold. Consequently, rapeseed oil seems to be particularly exposed to exogenous shocks deriving from global political scenarios, suggesting to redefine the high quota (80%) of EU biodiesel produced by this vegetable oil through a sustainable development of international trade.

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Bibliographic Info

Paper provided by European Association of Agricultural Economists in its series 2008 International Congress, August 26-29, 2008, Ghent, Belgium with number 43971.

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Date of creation: 2008
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Handle: RePEc:ags:eaae08:43971

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Keywords: Vegetable oils market; Biodiesel price; Threshold cointegration.; Marketing; Resource /Energy Economics and Policy;

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  1. Hansen, Bruce E, 1996. "Inference When a Nuisance Parameter Is Not Identified under the Null Hypothesis," Econometrica, Econometric Society, Econometric Society, vol. 64(2), pages 413-30, March.
  2. James G. MacKinnon & Alfred A. Haug & Leo Michelis, 1996. "Numerical Distribution Functions of Likelihood Ratio Tests for Cointegration," Working Papers, York University, Department of Economics 1996_07, York University, Department of Economics.
  3. Hansen, Bruce E. & Seo, Byeongseon, 2002. "Testing for two-regime threshold cointegration in vector error-correction models," Journal of Econometrics, Elsevier, Elsevier, vol. 110(2), pages 293-318, October.
  4. Campiche, Jody L. & Bryant, Henry L. & Richardson, James W. & Outlaw, Joe L., 2007. "Examining the Evolving Correspondence Between Petroleum Prices and Agricultural Commodity Prices," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon TN 9881, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  5. Balke, Nathan S & Fomby, Thomas B, 1997. "Threshold Cointegration," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(3), pages 627-45, August.
  6. In, Francis & Inder, Brett, 1997. "Long‐run Relationships Between World Vegetable Oil Prices," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, Australian Agricultural and Resource Economics Society, vol. 41(4), December.
  7. Yu, Tun-Hsiang (Edward) & Bessler, David A. & Fuller, Stephen W., 2006. "Cointegration and Causality Analysis of World Vegetable Oil and Crude Oil Prices," 2006 Annual meeting, July 23-26, Long Beach, CA 21439, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  8. William Perkins & J. Richardson, 1990. "Correspondence," The Review of Black Political Economy, Springer, Springer, vol. 19(1), pages 91-91, June.
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Cited by:
  1. Subhani, Muhammad Imtiaz & Hasan, Syed Akif & Osman, Ms. Amber, 2012. "Are the Prices of Light Diesel Oil, Gasoline, CNG and Kerosene Oil Co-Integrated?," MPRA Paper 45142, University Library of Munich, Germany.
  2. Busse, Stefan & Ihle, Rico, 2009. "German Rapeseed Oil and Biodiesel Pricing under Changing Market Conditions: A Markov-switching Vector Error Correction Model Approach," 2009 Conference, August 16-22, 2009, Beijing, China, International Association of Agricultural Economists 51032, International Association of Agricultural Economists.
  3. Valeria Costantini & Graziana Dizonno, 2010. "Bioenergy, Agriculture and the Developing Countries," QA - Rivista dell'Associazione Rossi-Doria, Associazione Rossi Doria, issue 1, March.

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