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Time-Frequency Dynamics of Biofuels-Fuels-Food System

Author

Listed:
  • Lukas Vacha
  • Karel Janda
  • Ladislav Kristoufek
  • David Zilberman

Abstract

For the first time, we apply the wavelet coherence methodology on biofuels (ethanol and biodiesel) and a wide range of related commodities (gasoline, diesel, crude oil, corn, wheat, soybeans, sugarcane and rapeseed oil). This way, we are able to investigate dynamics of correlations in time and across scales (frequencies) with a model-free approach. We show that correlations indeed vary in time and across frequencies. We find two highly correlated pairs which are strongly connected at low frequencies - ethanol with corn and biodiesel with German diesel - during almost the whole analyzed period (2003-2011). Structure of correlations remarkably changes during the food crisis - higher frequencies become important for both mentioned pairs. This implies that during stable periods, ethanol is correlated with corn and biodiesel is correlated with German diesel mainly at low frequencies so that they follow a common long-term trend. However, in the crisis periods, ethanol (biodiesel) is lead by corn (German diesel) even at high frequencies (low scales), which implies that the biofuels prices react more rapidly to the changes in their producing factors.

Suggested Citation

  • Lukas Vacha & Karel Janda & Ladislav Kristoufek & David Zilberman, 2012. "Time-Frequency Dynamics of Biofuels-Fuels-Food System," Papers 1209.0900, arXiv.org.
  • Handle: RePEc:arx:papers:1209.0900
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    References listed on IDEAS

    as
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    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • Q16 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - R&D; Agricultural Technology; Biofuels; Agricultural Extension Services
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

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