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Structural Change in the Relationship Between Energy and Food Prices

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  • Mugera, Harriet
  • Gilbert, Christopher

Abstract

High fuel prices combined with legislative policies have increased biofuel production causing high food prices and establishing a link between energy and agricultural markets. This paper examines price relationships between agricultural food and energy commodities over the recent decade. A structural change analysis on weekly prices of crude oil, gasoline, ethanol, corn and wheat is conducted. The presence and the nature of structural breaks are empirically tested on single prices and on the price relationships. A cointegration analysis is conducted accounting for the presence of structural breaks. We find that commodity prices have experienced structural changes both at price levels and in the price relationships. The energy and food commodity prices exhibit long run relationships when structural breaks are considered. The break dates identified are in line with biofuel policy interventions and changes in policy regimes in the United States.

Suggested Citation

  • Mugera, Harriet & Gilbert, Christopher, 2015. "Structural Change in the Relationship Between Energy and Food Prices," 2015 Conference, August 9-14, 2015, Milan, Italy 212505, International Association of Agricultural Economists.
  • Handle: RePEc:ags:iaae15:212505
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    Keywords

    commodity prices; energy prices; structural breaks; co-breaking cointegration; policies. JEL codes:; Financial Economics; Food Consumption/Nutrition/Food Safety; C10; C32; Q10; Q18; Q28; Q42; Q48;

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • 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
    • Q10 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - General
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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