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Energy Policies and Food Prices

Author

Listed:
  • Shih-Wen Hu

    (Department of Economics, Feng Chia University, Taiwan)

  • Li-Ju Chen

    (University of Taipei, Taiwan and Department of Economics, Feng Chia University, Taiwan)

  • Vey Wang

    (Department of Economics, Feng Chia University, Taiwan)

  • Meng-Yi Tai

    (Department of Applied Economics, Fo Guang University, Taiwan)

  • Lee-Jung Lu

    (Department of Leisure Management, Tungnan University, Taiwan)

  • Chiu-Yue Lin

    (Green Energy Development Center, Feng Chia University, Taiwan)

Abstract

Biomass energy has been regarded as an effective instrument in combatting a high oil price. However, the increased production of biomass energy has raised the demand for agricultural products and led to a global grain deficiency and rising grain prices. This paper discusses the influence of energy policies on the agricultural product price using a macro model that contains the energy demand for agricultural products. The results show that: 1) A rise in the subsidy for agricultural products used for biomass energy will have an ambiguous effect on the agricultural product price and exchange rate in the long run. 2) The rise in the subsidy on agricultural products used for biomass energy will result in a misadjustment of the exchange rate in the short run. 3) When the elasticity of substitution between agricultural products and bonds is extremely large, the rise in the energy tax on fossil fuels will reduce the agricultural product price in the long run. 4) Given the extremely large elasticity of substitution between agricultural products and bonds, increasing the share of biomass energy in total energy will increase the agricultural product price in the short run and reduce the price in the long run.

Suggested Citation

  • Shih-Wen Hu & Li-Ju Chen & Vey Wang & Meng-Yi Tai & Lee-Jung Lu & Chiu-Yue Lin, 2015. "Energy Policies and Food Prices," Journal of Economics and Management, College of Business, Feng Chia University, Taiwan, vol. 11(1), pages 47-68, January.
    • Handle: RePEc:jec:journl:v:11:y:2015:i:1:p:47-68
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    References listed on IDEAS

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    2. Lai, Ching-Chong & Hu, Shih-Wen & Fan, Chih-Ping, 2005. "The Overshooting Hypothesis of Agricultural Prices: The Role of Asset Substitutability," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 30(1), pages 1-23, April.
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    8. Chen, Sheng-Tung & Kuo, Hsiao-I & Chen, Chi-Chung, 2010. "Modeling the relationship between the oil price and global food prices," Applied Energy, Elsevier, vol. 87(8), pages 2517-2525, August.
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    More about this item

    Keywords

    food price; biomass energy; dynamic adjustment;
    All these keywords.

    JEL classification:

    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy
    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)

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