Non-linear Price Transmission between Biofuels, Fuels and Food Commodities

Ladislav Krištoufek (lk@fsv.cuni.cz), Karel Janda and David Zilberman

CERGE-EI Working Papers from The Center for Economic Research and Graduate Education - Economics Institute, Prague

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. Causality tests further show that price changes in production factors lead the changes in biofuels even after controlling for price effects.

Keywords: biofuels; price transmission; price cross-elasticity; causality (search for similar items in EconPapers)
JEL-codes: C22 Q16 Q42 (search for similar items in EconPapers)
Date: 2013-02
New Economics Papers: this item is included in nep-agr and nep-ene
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Working Paper: Non-linear price transmission between biofuels, fuels and food commodities (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:cer:papers:wp481

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