Interdependencies between Biofuel, Fuel and Food Prices: The Case of the Brazilian Ethanol Market

Deborah Bentivoglio, Adele Finco and Mirian Rumenos Piedade Bacchi
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Deborah Bentivoglio: Department of Agricultural, Food and Environmental Sciences (D3A), Università Politecnica delle Marche, Via Brecce Bianche, Ancona 60131, Italy
Adele Finco: Department of Agricultural, Food and Environmental Sciences (D3A), Università Politecnica delle Marche, Via Brecce Bianche, Ancona 60131, Italy
Mirian Rumenos Piedade Bacchi: Departamento de Economia Administração e Sociologia, Escola Superior de Agricultura Luiz de Queiroz, Universidade de São Paulo, Av. Pádua Dias 11, Piracicaba, São Paulo 13400-970, Brazil

Energies, 2016, vol. 9, issue 6, 1-16

Abstract: Brazil is currently the world’s largest sugar producer and exporter, as well as the world’s largest producer and consumer of sugarcane ethanol as a transportation fuel. The growth of this market originates from a combination of government policies and technological change, in both the sugarcane ethanol processing sector and the manufacture of flex-fuel vehicles. In recent years however, ethanol production has been questioned due to its possible impact on food prices. The present paper aims to explore the impact of Brazilian ethanol prices on sugar and gasoline prices. The relationships between a times series of these prices are investigated using a Vector Error Correction Model (VECM), supported by Granger Causality tests. In addition, Impulse Response Functions (IRFs) and Forecast Error Variance Decompositions (FEVD) are computed in order to investigate the dynamic interrelationships within these series. Our results suggest that ethanol prices are affected by both food and fuel prices, but that there is no strong evidence that changes in ethanol prices have an impact on food prices.

Keywords: ethanol; sugar; gasoline; prices; Vector Error Correction Model (VECM); granger causality (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

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