On the Evolving Relationship between Corn and Oil Prices

Eskandar Elmarzougui and Bruno Larue

No 118580, Working Papers from University of Laval, Center for Research on the Economics of the Environment, Agri-food, Transports and Energy (CREATE)

Abstract: The relationship between corn and oil prices is not a stable one. We identified three breaks in the relationship between corn and oil prices. The first break coincides with the second oil crisis. The second break marks the end of the agricultural export subsidy war between the EU and the US in the mid 1980s while the third one occurred at the beginning of the ethanol boom at the very end of the 1990s. The relationship between corn and oil prices tends to be stronger when oil prices are highly volatile and when agricultural policies create less distortion. The ethanol boom strengthened the relation between corn and oil prices which are (were not) cointegrated in the fourth regime (first three) regime(s). Impulse response functions confirm that corn prices systematically respond to oil price shocks, but the converse is not observed.

Keywords: Agricultural; and; Food; Policy (search for similar items in EconPapers)
Pages: 30
Date: 2011-12
New Economics Papers: this item is included in nep-agr and nep-ene
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Citations: View citations in EconPapers (1)

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Working Paper: On the Evolving Relationship between Corn and Oil Prices (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:ulavwp:118580

DOI: 10.22004/ag.econ.118580

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