The Effect of Biofuels on the Link between Oil and Agricultural Commodity Prices: A Smooth Transition Cointegration Approach

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

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Abstract: The aim of this paper is to investigate the long-term effect of the price of oil on agricultural commodity prices by accounting for the influence of biofuel production. Relying on the estimation of nonlinear, cointegrating regime-switching processes, we show that biofuel development has led to an increase in the oil-price effect on agricultural commodity prices: the growing production of biofuels is contributing to the price rise of agricultural commodities. This result underlines the importance of considering alternative biofuels which are not produced from agricultural commodities, and of analyzing the potential effects of the second-generation biofuels derived from agricultural plant residuals or non-food plants.

Keywords: Biofuel; Oil price; Agricultural commodity; Nonlinear econometrics (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (6)

Published in 39th International Conference of IAEE , 2016, Bergen, Unknown Region

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01647541

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