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On the current account - biofuels link in emerging and developing countries: do oil price fluctuations matter?

Author

Listed:
  • Gabriel Gomes
  • Emmanuel Hache
  • Valérie Mignon

    () (EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

  • Anthony Paris

    () (EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

Abstract

Many developed countries promote the use of biofuels for environmental concerns, leading to a rise in the price of agricultural commodities utilized in their production. Such environmental policies have major effects on the economy of emerging and developing countries whose activity is highly dependent on agricultural commodities involved in biofuel production. This paper tackles this issue by examining the price impact of biofuels on the current account for a panel of 16 developing and emerging countries, and the potential nonlinear effect exerted by the price of oil on this relationship. Relying on the estimation of panel smooth-transition regression models, we show that positive shocks in the price of biofuels lead to a current-account improvement for agricultural commodity exporters and producers only when the price of oil is below a certain threshold. When the price of oil exceeds this threshold, uctuations in the price of biofuels no longer affect the current account. These findings illustrate that a rise in the price of oil exerts a negative effect on the trade balance of commodity exporters which are also oil importers, dampening the biofuel price impact on the current-account position.
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Suggested Citation

  • Gabriel Gomes & Emmanuel Hache & Valérie Mignon & Anthony Paris, 2018. "On the current account - biofuels link in emerging and developing countries: do oil price fluctuations matter?," Post-Print hal-01694367, HAL.
  • Handle: RePEc:hal:journl:hal-01694367
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-01694367
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • Q16 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - R&D; Agricultural Technology; Biofuels; Agricultural Extension Services
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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