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The Long-Run Impact of Energy Prices on World Agricultural Markets: The Role of Macro-Economic Linkages

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  • Chantret, Francois
  • Gohin, Alexandre
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    Abstract

    The world prices of food and energy products have followed similar large swings in recent years. We investigate the long run relationship between these prices using a world Computable General Equilibrium model with detailed representations of food and energy markets. Particular attention is paid to specify macro-economic linkages which have often been overlooked in recent analysis and debate. We find that the omission of these macro-economic linkages has a substantial bearing on this relationship. A positive relationship due to the cost push effect has been identified in most analysis, but we find that the introduction of the real income effect may indeed imply a negative relationship between world food and energy prices. Accordingly, it is crucial to move from a sector-focused analysis to a system wide approach when analyzing the linkages between global energy and food markets.

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    File URL: http://purl.umn.edu/51560
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    Bibliographic Info

    Paper provided by International Association of Agricultural Economists in its series 2009 Conference, August 16-22, 2009, Beijing, China with number 51560.

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    Date of creation: 2009
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    Handle: RePEc:ags:iaae09:51560

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    Web page: http://www.iaae-agecon.org/
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    Related research

    Keywords: oil prices; agricultural prices; computable general equilibrium model; Agricultural and Food Policy; Consumer/Household Economics; Crop Production/Industries; Demand and Price Analysis; International Relations/Trade;

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    1. Vincent, David P. & Dixon, Peter B. & Parmenter, B.R. & Sams, D.C., 1979. "The Short-Term Effect Of Domestic Oil Price Increases On The Australian Economy With Special Reference To The Agricultural Sector," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 23(02), August.
    2. Burniaux, Jean-Marc & Truong Truong, 2002. "GTAP-E: An Energy-Environmental Version of the GTAP Model," GTAP Technical Papers 923, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    3. Keeney, Roman & Thomas Hertel, 2005. "GTAP-AGR : A Framework for Assessing the Implications of Multilateral Changes in Agricultural Policies," GTAP Technical Papers 1869, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    4. Alain Bernard & Marc Vielle, 2008. "GEMINI-E3, a general equilibrium model of international–national interactions between economy, energy and the environment," Computational Management Science, Springer, vol. 5(3), pages 173-206, May.
    5. Hanson, Kenneth & Robinson, Sherman & Schluter, Gerald E., 1993. "Sectoral Effects Of A World Oil Price Shock: Economywide Linkages To The Agricultural Sector," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 18(01), July.
    6. Gohin, Alexandre, 2005. "The specification of price and income elasticities in computable general equilibrium models: An application of latent separability," Economic Modelling, Elsevier, vol. 22(5), pages 905-925, September.
    7. Beckman, Jayson & Hertel, Thomas, 2009. "Why Previous Estimates of the Cost of Climate Mitigation are Likely Too Low," GTAP Working Papers 2954, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    8. Harry de Gorter & David R. Just, 2007. "The Welfare Economics of a Biofuel Tax Credit and the Interaction Effects with Price Contingent Farm Subsidies," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(2), pages 477-488.
    9. Tokgoz, Simla & Elobeid, Amani & Fabiosa, Jacinto F. & Hayes, Dermot J. & Babcock, Bruce A. & Yu, Tun-Hsiang & Dong, Fengxia & Hart, Chad E., 2008. "Bottlenecks, Drought, and Oil Price Spikes: Impact on U.S. Ethanol and Agricultural Sectors," Staff General Research Papers 12935, Iowa State University, Department of Economics.
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