Title: Interdependencies in the Energy-Bioenergy-Food Price Systems: A Cointegration Analysis
Citation: EERI Research Papers vol. 6 p. 1-43
Publisher: Economics and Econometrics Research Institute (EERI)
Publication Year: 2009
JRC N°: JRC56143
ISSN: 2031-4892
URI: http://www.eeri.eu/documents/wp/EERI_RP_2009_06.pdf
Type: Articles in periodicals and books
Abstract: The present paper studies the interdependencies between the energy, bioenergy and food prices. We develop a vertically integrated multi-input, multi-output model, which suggests two channels of price transmission: a direct biofuel channel and an indirect input channel. To test the theoretical hypothesis, we apply time-series analytical mechanisms to nine major traded agricultural commodity prices, including corn, wheat, rice, sugar, soybeans, cotton, banana, sorghum and tea, along with one weighted average world crude oil price. The data consists of 783 weekly observations extending from January 1994 to December 2006. The empirical findings confirm the theoretical hypothesis that the prices for crude oil and agricultural commodity are interdependent. Agricultural commodity prices are affected through the direct biofuel channel: an increase in oil price by 1 dollar/barrel increases the agricultural commodity prices between 0.10 $/tonne and 1.50 $/tonne. Contrary to the theoretical predictions, the indirect input channel of price transmission is small and statistically insignificant.
JRC Directorate:Growth and Innovation

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