IDEAS home Printed from https://ideas.repec.org/a/eee/enepol/v116y2018icp60-67.html
   My bibliography  Save this article

On the current account - biofuels link in emerging and developing countries: do oil price fluctuations matter?

Author

Listed:
  • Gomes, Gabriel
  • Hache, Emmanuel
  • Mignon, Valérie
  • Paris, Anthony

Abstract

Many developed countries promote the use of biofuels for environmental concerns, leading to a rise in the price of agricultural commodities utilized in their production. Such environmental policies have major effects on the economy of emerging and developing countries whose activity is highly dependent on agricultural commodities involved in biofuel production. This paper tackles this issue by examining the price impact of biofuels on the current account for a panel of 16 developing and emerging countries, and the potential nonlinear effect exerted by the price of oil on this relationship. Relying on the estimation of panel smooth-transition regression models, we show that positive shocks in the price of biofuels lead to a current-account improvement for agricultural commodity exporters (resp. producers) only when the price of oil is below 45 (resp. 56) US dollars per barrel. When the price of oil exceeds these thresholds, the effect of fluctuations in the price of biofuels on the current account tends to weaken and become non significant. Under these conditions, our findings indicate that, for agricultural commodity exporters which are also oil importers, the current account is pulled by two opposite forces, making its overall reaction modest or even nil.

Suggested Citation

  • Gomes, Gabriel & Hache, Emmanuel & Mignon, Valérie & Paris, Anthony, 2018. "On the current account - biofuels link in emerging and developing countries: do oil price fluctuations matter?," Energy Policy, Elsevier, vol. 116(C), pages 60-67.
  • Handle: RePEc:eee:enepol:v:116:y:2018:i:c:p:60-67
    DOI: 10.1016/j.enpol.2018.01.054
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301421518300624
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Andrés González & Timo Teräsvirta & Dick van Dijk & Yukai Yang, 1910. "Panel Smooth Transition Regression Models," CREATES Research Papers 2017-36, Department of Economics and Business Economics, Aarhus University.
    2. César Calderón & Alberto Chong & Luisa Zanforlin, 2007. "Current Account Deficits in Africa: Stylized Facts and Basic Determinants," Economic Development and Cultural Change, University of Chicago Press, vol. 56, pages 191-221.
    3. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, November.
    4. Calderon Cesar Augusto & Chong Alberto & Loayza Norman V., 2002. "Determinants of Current Account Deficits in Developing Countries," The B.E. Journal of Macroeconomics, De Gruyter, vol. 2(1), pages 1-33, March.
    5. Khanna, Madhu & Onal, Hayri & Chen, Xiaoguang & Huang, Haixiao, 2008. "Meeting Biofuels Targets: Implications for Land Use, Greenhouse Gas Emissions and Nitrogen Use in Illinois," Environmental and Rural Development Impacts Conference, October 15-16, 2008, St. Louis, Missouri 53491, Farm Foundation, Transition to a Bio Economy Conferences.
    6. Baffes, John, 2007. "Oil spills on other commodities," Resources Policy, Elsevier, vol. 32(3), pages 126-134, September.
    7. Allegret, Jean-Pierre & Couharde, Cécile & Coulibaly, Dramane & Mignon, Valérie, 2014. "Current accounts and oil price fluctuations in oil-exporting countries: The role of financial development," Journal of International Money and Finance, Elsevier, vol. 47(C), pages 185-201.
    8. Sophocles Brissimis & George Hondroyiannis & Christos Papazoglou & Nicholas Tsaveas & Melina Vasardani, 2012. "Current account determinants and external sustainability in periods of structural change," Economic Change and Restructuring, Springer, vol. 45(1), pages 71-95, February.
    9. Criqui, Patrick & Mima, Silvana, 2012. "European climate—energy security nexus: A model based scenario analysis," Energy Policy, Elsevier, vol. 41(C), pages 827-842.
    10. Philip Abbott & Adeline Borot de Battisti, 2011. "Recent Global Food Price Shocks: Causes, Consequences and Lessons for African Governments and Donors-super- †," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 20(suppl_1), pages -62, May.
    11. Ujjayant Chakravorty & Marie-Hélène Hubert & Beyza Ural Marchand, 2012. "Food for Fuel: The Effect of the US Biofuel Mandate on Poverty in India," CESifo Working Paper Series 3910, CESifo Group Munich.
    12. Gruber, Joseph W. & Kamin, Steven B., 2007. "Explaining the global pattern of current account imbalances," Journal of International Money and Finance, Elsevier, vol. 26(4), pages 500-522, June.
    13. Razin, A., 1993. "The Dynamic-Optimizing Approach to the Current Account: Theory and Evidence," Papers 2-93, Tel Aviv - the Sackler Institute of Economic Studies.
    14. Hansen, Bruce E., 1999. "Threshold effects in non-dynamic panels: Estimation, testing, and inference," Journal of Econometrics, Elsevier, vol. 93(2), pages 345-368, December.
    15. Calista Cheung & Davide Furceri & Elena Rusticelli, 2013. "Structural and Cyclical Factors behind Current Account Balances," Review of International Economics, Wiley Blackwell, vol. 21(5), pages 923-944, November.
    16. Hamid Faruqee & Guy Debelle, 1996. "What Determines the Current Account? a Cross-Sectional and Panel Approach," IMF Working Papers 96/58, International Monetary Fund.
    17. Chinn, Menzie D. & Ito, Hiro, 2007. "Current account balances, financial development and institutions: Assaying the world "saving glut"," Journal of International Money and Finance, Elsevier, vol. 26(4), pages 546-569, June.
    18. Chinn, Menzie D. & Prasad, Eswar S., 2003. "Medium-term determinants of current accounts in industrial and developing countries: an empirical exploration," Journal of International Economics, Elsevier, vol. 59(1), pages 47-76, January.
    19. Paul B. Thompson, 2012. "The Agricultural Ethics of Biofuels: The Food vs. Fuel Debate," Agriculture, MDPI, Open Access Journal, vol. 2(4), pages 1-20, November.
    20. Anthony Paris, 2016. "The Effect of Biofuels on the Link between Oil and Agricultural Commodity Prices: A Smooth Transition Cointegration Approach," EconomiX Working Papers 2016-5, University of Paris Nanterre, EconomiX.
    21. Ciaian, Pavel & Kancs, d'Artis, 2011. "Interdependencies in the energy-bioenergy-food price systems: A cointegration analysis," Resource and Energy Economics, Elsevier, vol. 33(1), pages 326-348, January.
    22. Gohin, A. & Chantret, F., 2010. "The long-run impact of energy prices on world agricultural markets: The role of macro-economic linkages," Energy Policy, Elsevier, vol. 38(1), pages 333-339, January.
    23. Berument, M. Hakan & Sahin, Afsin & Sahin, Serkan, 2014. "The relative effects of crude oil price and exchange rate on petroleum product prices: Evidence from a set of Northern Mediterranean countries," Economic Modelling, Elsevier, vol. 42(C), pages 243-249.
    24. Dick van Dijk & Dennis Fok & Philip Hans Franses, 2005. "A multi-level panel STAR model for US manufacturing sectors," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(6), pages 811-827.
    25. Bouakez, Hafedh & Kano, Takashi, 2008. "Terms of trade and current account fluctuations: The Harberger-Laursen-Metzler effect revisited," Journal of Macroeconomics, Elsevier, vol. 30(1), pages 260-281, March.
    26. John Baffes, 2010. "More on the energy/nonenergy price link," Applied Economics Letters, Taylor & Francis Journals, vol. 17(16), pages 1555-1558.
    27. Anthony Paris, 2016. "The Effect of Biofuels on the Link between Oil and Agricultural Commodity Prices: A Smooth Transition Cointegration Approach," Post-Print hal-01647541, HAL.
    28. Menzie D. Chinn & Hiro Ito, 2008. "Global Current Account Imbalances: American Fiscal Policy versus East Asian Savings," Review of International Economics, Wiley Blackwell, vol. 16(3), pages 479-498, August.
    29. Abbott, Philip C. & Hurt, Christopher & Tyner, Wallace E., 2011. "What’s Driving Food Prices in 2011?," Issue Reports 112927, Farm Foundation.
    30. Patrick Criqui & Silvana Mima, 2012. "European climate -- energy security nexus: A model based scenario analysis," Post-Print halshs-00661043, HAL.
    31. Darryl Jones & Andrzej Kwieciński, 2010. "Policy Responses in Emerging Economies to International Agricultural Commodity Price Surges," OECD Food, Agriculture and Fisheries Papers 34, OECD Publishing.
    32. Madhu Khanna & Christine L. Crago, 2012. "Measuring Indirect Land Use Change with Biofuels: Implications for Policy," Annual Review of Resource Economics, Annual Reviews, vol. 4(1), pages 161-184, August.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Biofuels; Oil; Current account; Panel smooth transition regression;

    JEL classification:

    • Q16 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - R&D; Agricultural Technology; Biofuels; Agricultural Extension Services
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:enepol:v:116:y:2018:i:c:p:60-67. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/enpol .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.