Dynamic interdependence between ethanol and biofuel‐related agricultural commodities—cDCC‐FIAPARCH approach

Biofuel production is one of the key topics in today's world, which inevitably raises the question of the relationship between ethanol and agricultural commodities. The nexus between corn and ethanol is well known in the literature, but the link involving other biofuel feedstocks is relatively poorly explored. Therefore, this paper research the dynamic nexus between ethanol and five agricultural commodities using the cDCC‐FIAPARCH model, while two additional analyses complement the main results. Dynamic conditional correlation between ethanol and corn is the highest and reaches an average of 50%, while wheat and soybean follow with 31%. A rolling regression analysis reveals the relationship between conditional volatilities and conditional correlations, where the assets with lower conditional volatility have a more significant impact on conditional correlation. The findings may have several practical implications for agents working with ethanol and agricultural commodities, such as food security assessment, efficiency of supply chains and portfolio construction. [EconLit Citations: C61, O13, Q16].