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Non-linear price transmission between biofuels, fuels and food commodities

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Abstract

For the biofuel markets and related commodities, we study their price transmission, which is in fact equivalent to studying price cross-elasticities. Importantly, we focus on the price dependence of the price transmission mechanism. Several methodological caveats are discussed. Specifically, we combine the memory robust feasible generalized least squares estimation with two-stage least squares to control for endogeneity bias and inconsistency. We find that both ethanol and biodiesel prices are responsive to their production factors (ethanol to corn, and biodiesel to German diesel). The strength of transmission between both significant pairs increased remarkably during the food crisis of 2007/2008.

Suggested Citation

  • Ladislav Kristoufek & Karel Janda & David Zilberman, 2013. "Non-linear price transmission between biofuels, fuels and food commodities," Working Papers IES 2013/16, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Oct 2013.
    • Handle: RePEc:fau:wpaper:wp2013_16
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    File URL: http://ies.fsv.cuni.cz/sci/publication/show/id/4903/lang/cs
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    Cited by:

    1. Ladislav Kristoufek & Karel Janda & David Zilberman, 2015. "Co-movements of Ethanol Related Prices: Evidence from Brazil and the USA," CAMA Working Papers 2015-11, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    2. Deborah Bentivoglio & Adele Finco & Mirian Rumenos Piedade Bacchi, 2016. "Interdependencies between Biofuel, Fuel and Food Prices: The Case of the Brazilian Ethanol Market," Energies, MDPI, vol. 9(6), pages 1-16, June.
    3. Bastianin, Andrea & Galeotti, Marzio & Manera, Matteo, 2014. "Causality and predictability in distribution: The ethanol–food price relation revisited," Energy Economics, Elsevier, vol. 42(C), pages 152-160.
    4. Ondřej Filip & Karel Janda & Ladislav Krištoufek, 2018. "Ceny biopaliv a souvisejících komodit: analýza s použitím metod minimální kostry grafu a hierarchických stromů [Prices of Biofuels and Related Commodities: an Analysis Using Methods of Minimum Span," Politická ekonomie, Prague University of Economics and Business, vol. 2018(2), pages 218-239.

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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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