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Price volatility in ethanol markets

Author

Listed:
  • Serra, Teresa
  • Zilberman, David

Abstract

Our paper looks at how price volatility in the Brazilian ethanol industry changes over time and across markets by using a new methodological approach suggested by Seo (2007). The main advantage of Seo’s proposal over previously existing methods is that it allows to jointly estimate the cointegration relationship between the price series investigated and the multivariate GARCH process. Our results suggest that crude oil prices not only influence ethanol price levels, but also their volatility. Increased volatility in crude oil markets results in increased volatility in ethanol markets. Ethanol prices, on the other hand, influence sugar price levels and an increase in their volatility levels also impacts, though less strongly, on sugar markets.

Suggested Citation

  • Serra, Teresa & Zilberman, David, 2009. "Price volatility in ethanol markets," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49188, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea09:49188
    DOI: 10.22004/ag.econ.49188
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    JEL classification:

    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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