Price Dynamics in Food-Energy Market in China
In this paper we examine price transmission for major agriculture (food) and energy products in China for the years 2004 to 2010. The Error correction model (ECM) and the directed acyclic graphs (DAG) are applied to identify price dynamics among these six variables: rice, wheat, corn, coal, crude oil and ethanol. Our major contribution to the existing literature lies in two perspectives: 1) We firstly employ the error correction model with directed acyclic graphs to study the price dynamics in the food-energy sector in China. The advantage of this approach is that it can offer data-determined (as opposed to a subjectively-determined) pattern for the contemporaneous causal flows which are then used to conduct a more reliable innovation accounting analysis of the ECM shocks. 2) We uncover a recent price transmission among major food-energy markets in China and provide a broad understanding of price adjustments across markets. The result indicates that in the short run, crop price is driving the energy price, while in the long run, crude oil is the leading factor that drives food and other energy prices. We also find that ethanol price is neither in the long-run equilibrium nor responding to deviation from long-run equilibrium. It supports that under the current policy, Chinese government has done well to prevent the ethanol price driving up the food price. The biofuel production is not the cause of rising food price in China.
|Date of creation:||2012|
|Contact details of provider:|| Postal: 555 East Wells Street, Suite 1100, Milwaukee, Wisconsin 53202|
Phone: (414) 918-3190
Fax: (414) 276-3349
Web page: http://www.aaea.org
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:ags:aaea12:124631. 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: (AgEcon Search)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 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.