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Contemporaneous interactions among fuel, biofuel and agricultural commodities

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  • Fernandez-Perez, Adrian
  • Frijns, Bart
  • Tourani-Rad, Alireza

Abstract

This study examines the contemporaneous interactions among energy (oil and ethanol) and agricultural commodities (corn, soybean, and wheat) in the United States during the period 1 June 2006 to 22 January 2016. Since traditional VAR analysis is not able to capture the contemporaneous interactions among these commodities, we employ a structural VAR analysis in combination with the identification through heteroskedasticity approach. The empirical results indicate that i) the contemporaneous interactions are important, asymmetric, and have implications for impulse response functions; ii) crude oil has a unidirectional contemporaneous impact on the agricultural commodities, and the agricultural commodities (corn and soybean) – mostly used in the biofuel production – have a unidirectional contemporaneous impact on ethanol; and finally, iii) these contemporaneous relations depend on the price level of crude oil in that there are stronger effects from crude oil (agricultural commodities) to agricultural commodities (ethanol) in high crude oil price states.

Suggested Citation

  • Fernandez-Perez, Adrian & Frijns, Bart & Tourani-Rad, Alireza, 2016. "Contemporaneous interactions among fuel, biofuel and agricultural commodities," Energy Economics, Elsevier, vol. 58(C), pages 1-10.
    • Handle: RePEc:eee:eneeco:v:58:y:2016:i:c:p:1-10
    DOI: 10.1016/j.eneco.2016.05.014
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    More about this item

    Keywords

    Contemporaneous interactions; Biofuel; Structural VAR;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • Q16 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - R&D; Agricultural Technology; Biofuels; Agricultural Extension Services
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

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