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

Author

Listed:
  • Gabriel Gomes

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

  • Emmanuel Hache

    (IFPEN - IFP Energies nouvelles - IFPEN - IFP Energies nouvelles)

  • Valerie Mignon

    (CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique, 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, IFPEN - IFP Energies nouvelles - IFPEN - IFP Energies nouvelles)

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 (resp. producers) only when the price of oil is below 45 (resp. 56) US dollars per barrel. When the price of oil exceeds these thresholds, the effect of fluctuations in the price of biofuels on the current account tends to weaken and become non significant. Under these conditions, our findings indicate that, for agricultural commodity exporters which are also oil importers, the current account is pulled by two opposite forces, making its overall reaction modest or even nil. JEL Classification: Q16; Q43; F32; C23.. We would like to thank Cécile Couharde, Anne-Laure Delatte and Sébastien Jean for helpful comments and suggestions.

Suggested Citation

  • Gabriel Gomes & Emmanuel Hache & Valerie Mignon & Anthony Paris, 2018. "On the current account-biofuels link in emerging and developing countries: do oil price fluctuations matter? ," Post-Print hal-01882204, HAL.
  • Handle: RePEc:hal:journl:hal-01882204
    DOI: 10.1016/j.enpol.2018.01.054
    Note: View the original document on HAL open archive server: https://hal-ifp.archives-ouvertes.fr/hal-01882204
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    More about this item

    Keywords

    Biofuels; Oil; Current account; Panel smooth transition regression *;
    All these keywords.

    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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