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

Anthony Paris

No 2016-5, EconomiX Working Papers from University of Paris Nanterre, EconomiX

Abstract: Given the few studies highlighting the existence of an oil-price effect on agricultural commodity prices in the last decade, we sought to demonstrate the role of first-generation biofuel production in such a relationship. Relying on a smooth transition cointegration approach, we show that biofuel development has led to an increase in the long-term price effect of oil on agricultural commodity prices. Thus, the increasing production of biofuels contributes to the price rise of agricultural commodities. This result underlines the importance of accelerating second-generation biofuel production to replace first-generation biofuels.

Keywords: Biofuel; Oil price; Agricultural commodity; Nonlinear econometrics. (search for similar items in EconPapers)
JEL-codes: C22 Q02 Q16 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2016
New Economics Papers: this item is included in nep-agr and nep-ene
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Persistent link: https://EconPapers.repec.org/RePEc:drm:wpaper:2016-5

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