Nonlinearities in the US corn-ethanol-oil price system

Teresa Serra, David Zilberman, Jose Maria Gil and Barry Goodwin (barry.k.goodwin@gmail.com)

No 6512, 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida from American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association)

Abstract: We use a smooth transition vector error correction model to assess price relationships within the US ethanol industry. Daily ethanol, corn and oil futures prices observed from mid-2005 to mid-2007 are used in the analysis. Results indicate the existence of an equilibrium relationship between ethanol, corn and oil prices. However, only ethanol prices adjust, in a non-linear fashion, to deviations from this long-run parity. Generalized impulse response functions indicate that a shock to both oil and corn prices causes a change in ethanol prices of the same sign. Ethanol responses usually reach a peak after about 10 days of the initial shock and fade away within 35 days.

Keywords: Resource/Energy; Economics; and; Policy (search for similar items in EconPapers)
Pages: 23
Date: 2008
New Economics Papers: this item is included in nep-ene
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea08:6512

DOI: 10.22004/ag.econ.6512

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