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Are there multiple bubbles in the ethanol–gasoline price ratio of Brazil?

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  • El Montasser, Ghassen
  • Gupta, Rangan
  • Martins, Andre Luis
  • Wanke, Peter

Abstract

This paper tests for the existence of bubbles in the ethanol–gasoline price ratio in Brazil from 2000 to 2012 using right-tailed ADF tests. Results suggest the existence of two bubbles: one which has already burst (during the re-election of President Lula); and one which has been ongoing since 2010, thus corroborating empirical and anecdotal evidence in the Brazilian sugarcane industry. Freezing gasoline prices not only depressed ethanol prices but also depressed investments in new sugarcane crops and distillation plants.

Suggested Citation

  • El Montasser, Ghassen & Gupta, Rangan & Martins, Andre Luis & Wanke, Peter, 2015. "Are there multiple bubbles in the ethanol–gasoline price ratio of Brazil?," Renewable and Sustainable Energy Reviews, Elsevier, vol. 52(C), pages 19-23.
    • Handle: RePEc:eee:rensus:v:52:y:2015:i:c:p:19-23
    DOI: 10.1016/j.rser.2015.07.085
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    2. Eckert, Jony Javorski & Silva, Fabrício L. & da Silva, Samuel Filgueira & Bueno, André Valente & de Oliveira, Mona Lisa Moura & Silva, Ludmila C.A., 2022. "Optimal design and power management control of hybrid biofuel–electric powertrain," Applied Energy, Elsevier, vol. 325(C).
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    6. Derick David Quintino & Heloisa Lee Burnquist & Paulo Ferreira, 2022. "Relative Prices of Ethanol-Gasoline in the Major Brazilian Capitals: An Analysis to Support Public Policies," Energies, MDPI, vol. 15(13), pages 1-23, June.
    7. Hakan Yıldırım, 2022. "VIX or ınvestors scare?," Quality & Quantity: International Journal of Methodology, Springer, vol. 56(2), pages 769-777, April.
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    9. Aloisio S. Nascimento Filho & Hugo Saba & Rafael G. O. dos Santos & João Gabriel A. Calmon & Marcio L. V. Araújo & Eduardo M. F. Jorge & Thiago B. Murari, 2021. "Analysis of Hydrous Ethanol Price Competitiveness after the Implementation of the Fossil Fuel Import Price Parity Policy in Brazil," Sustainability, MDPI, vol. 13(17), pages 1-12, September.
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    More about this item

    Keywords

    Brazil; Bubbles; Ethanol–gasoline price-ratio; Right-tailed ADF tests;
    All these keywords.

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • Q16 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - R&D; Agricultural Technology; Biofuels; Agricultural Extension Services
    • Q21 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Demand and Supply; Prices

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