IDEAS home Printed from https://ideas.repec.org/a/eme/jfeppp/v3y2011i2p161-174.html
   My bibliography  Save this article

Do bio‐fuel policies lead to speculative behavior?

Author

Listed:
  • Chia‐Hsing Huang
  • Liang‐Chun Ho

Abstract

Purpose - This paper seeks to study the impact of bio‐fuel policies on oil and food futures prices from December 6, 2004 to August 1, 2008. Design/methodology/approach - The daily closing prices of brent crude oil, light sweet crude oil, corn, wheat, soybeans, and rough rice futures from December 6, 2004 to August 1, 2008 are used in this research. The vector error correction model is applied in order to study the impact of bio‐fuel policies on oil and agricultural futures prices. Findings - Unit root and cointegration tests show that the brent crude oil, light sweet crude oil, wheat, corn, soybeans, and rough rice futures are stationary and have a long‐run equilibrium relationship. Granger causality tests of the four periods shows that the causality relationship between oil futures and food futures changes over time. The first period result shows many Granger causes on several variables at a 5 percent significance level. The second period has more Granger causes at the 5 percent significance level. However, the Granger causality relationships become fewer and fewer in the third and fourth period. Originality/value - This is the first paper to study the impact of the four major bio‐fuel policies of Brazil, the European Union, and the USA.

Suggested Citation

  • Chia‐Hsing Huang & Liang‐Chun Ho, 2011. "Do bio‐fuel policies lead to speculative behavior?," Journal of Financial Economic Policy, Emerald Group Publishing Limited, vol. 3(2), pages 161-174, May.
    • Handle: RePEc:eme:jfeppp:v:3:y:2011:i:2:p:161-174
    DOI: 10.1108/17576381111133624
    as

    Download full text from publisher

    File URL: https://www.emerald.com/insight/content/doi/10.1108/17576381111133624/full/html?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://www.emerald.com/insight/content/doi/10.1108/17576381111133624/full/pdf?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1108/17576381111133624?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Granger, C. W. J., 1988. "Causality, cointegration, and control," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 551-559.
    2. Sims, Christopher A., 1988. "Bayesian skepticism on unit root econometrics," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 463-474.
    3. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    4. Hammoudeh, Shawkat & Li, Huimin, 2004. "The impact of the Asian crisis on the behavior of US and international petroleum prices," Energy Economics, Elsevier, vol. 26(1), pages 135-160, January.
    5. James D. Hamilton, 2009. "Understanding Crude Oil Prices," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 179-206.
    6. Garbade, Kenneth D & Silber, William L, 1983. "Price Movements and Price Discovery in Futures and Cash Markets," The Review of Economics and Statistics, MIT Press, vol. 65(2), pages 289-297, May.
    7. Ke Tang & Wei Xiong, 2012. "Index Investment and the Financialization of Commodities," Financial Analysts Journal, Taylor & Francis Journals, vol. 68(6), pages 54-74, November.
    8. Green, T. Clifton & Hwang, Byoung-Hyoun, 2009. "Price-based return comovement," Journal of Financial Economics, Elsevier, vol. 93(1), pages 37-50, July.
    9. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-1580, November.
    10. Hirshleifer, David & Subrahmanyam, Avanidhar & Titman, Sheridan, 1994. "Security Analysis and Trading Patterns When Some Investors Receive Information before Others," Journal of Finance, American Finance Association, vol. 49(5), pages 1665-1698, December.
    11. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    12. Kelvin Balcombe & George Rapsomanikis, 2008. "Bayesian Estimation and Selection of Nonlinear Vector Error Correction Models: The Case of the Sugar-Ethanol-Oil Nexus in Brazil," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(3), pages 658-668.
    13. Bowe, Michael & Domuta, Daniela, 2004. "Investor herding during financial crisis: A clinical study of the Jakarta Stock Exchange," Pacific-Basin Finance Journal, Elsevier, vol. 12(4), pages 387-418, September.
    14. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
    15. Soytas, Ugur & Sari, Ramazan, 2007. "The relationship between energy and production: Evidence from Turkish manufacturing industry," Energy Economics, Elsevier, vol. 29(6), pages 1151-1165, November.
    16. Hammoudeh, Shawkat & Li, Huimin & Jeon, Bang, 2003. "Causality and volatility spillovers among petroleum prices of WTI, gasoline and heating oil in different locations," The North American Journal of Economics and Finance, Elsevier, vol. 14(1), pages 89-114, March.
    17. S. Gurcan Gulen, 1999. "Regionalization in the World Crude Oil Market: Further Evidence," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 125-139.
    18. Sadorsky, Perry, 2000. "The empirical relationship between energy futures prices and exchange rates," Energy Economics, Elsevier, vol. 22(2), pages 253-266, April.
    19. Kelvin Balcombe & Alastair Bailey & Jonathan Brooks, 2007. "Threshold Effects in Price Transmission: The Case of Brazilian Wheat, Maize, and Soya Prices," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(2), pages 308-323.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Natanelov, Valeri & McKenzie, Andrew M. & Van Huylenbroeck, Guido, 2013. "Crude oil–corn–ethanol – nexus: A contextual approach," Energy Policy, Elsevier, vol. 63(C), pages 504-513.
    2. Papież, Monika & Śmiech, Sławomir, 2015. "Dynamic steam coal market integration: Evidence from rolling cointegration analysis," Energy Economics, Elsevier, vol. 51(C), pages 510-520.
    3. Kaufmann, Robert K. & Ullman, Ben, 2009. "Oil prices, speculation, and fundamentals: Interpreting causal relations among spot and futures prices," Energy Economics, Elsevier, vol. 31(4), pages 550-558, July.
    4. Asche, Frank & Misund, Bard & Oglend, Atle, 2015. "The Spot-Forward Relationship in the Atlantic Salmon Market," UiS Working Papers in Economics and Finance 2015/16, University of Stavanger.
    5. Sa-ngasoongsong, Akkarapol & Bukkapatnam, Satish T.S. & Kim, Jaebeom & Iyer, Parameshwaran S. & Suresh, R.P., 2012. "Multi-step sales forecasting in automotive industry based on structural relationship identification," International Journal of Production Economics, Elsevier, vol. 140(2), pages 875-887.
    6. Ramona Dumitriu & Razvan Stefanescu, 2015. "The Relationship Between Romanian Exports And Economic Growth After The Adhesion To European Union," Risk in Contemporary Economy, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, pages 17-26.
    7. Sayef Bakari & Sofien Tiba & Nissar Fakraoui, 2019. "Does Domestic Investment Contribute To Economic Growth In Uruguay? What Did The Empirical Facts Say?," Journal of Smart Economic Growth, , vol. 4(2), pages 53-69, September.
    8. Ericsson, Neil R & Hendry, David F & Mizon, Grayham E, 1998. "Exogeneity, Cointegration, and Economic Policy Analysis," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(4), pages 370-387, October.
    9. Eleni Constantinou & Avo Kazandjian & Georgios P. Kouretas & Vera Tahmazian, 2008. "Common Stochastic Trends Among The Cyprus Stock Exchange And The Ase, Lse And Nyse," Bulletin of Economic Research, Wiley Blackwell, vol. 60(4), pages 327-349, October.
    10. Eda BALIKÇIOĞLU & Kutay OKTAY, 2015. "Türkiye’de Turizm Gelirleri ve Ekonomik Büyüme İlişkisinin Kamu Politikaları Doğrultusunda Değerlendirilmesi," Sosyoekonomi Journal, Sosyoekonomi Society, issue 23(25).
    11. Aynur Pala, 2013. "Structural Breaks, Cointegration, and Causality by VECM Analysis of Crude Oil and Food Price," International Journal of Energy Economics and Policy, Econjournals, vol. 3(3), pages 238-246.
    12. Erdal Demirhan & Banu Demirhan, 2015. "The Dynamic Effect of ExchangeRate Volatility on Turkish Exports: Parsimonious Error-Correction Model Approach," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 62(4), pages 429-451, September.
    13. Diamandis, Panayiotis F., 2009. "International stock market linkages: Evidence from Latin America," Global Finance Journal, Elsevier, vol. 20(1), pages 13-30.
    14. Guglielmo Maria Caporale & Davide Ciferri & Alessandro Girardi, 2014. "Time-Varying Spot and Futures Oil Price Dynamics," Scottish Journal of Political Economy, Scottish Economic Society, vol. 61(1), pages 78-97, February.
    15. Esther Stroe-Kunold & Joachim Werner, 2009. "A drunk and her dog: a spurious relation? Cointegration tests as instruments to detect spurious correlations between integrated time series," Quality & Quantity: International Journal of Methodology, Springer, vol. 43(6), pages 913-940, November.
    16. Sayef Bakari & Nissar Fakraoui & Sofien Tiba, 2021. "Domestic Investment, Export, Import And Economic Growth In Brazil: An Application Of Vector Error Correction Model," Journal of Smart Economic Growth, , vol. 6(1), pages 31-48, Mars.
    17. Jan Jacobs & Albert van der Horst,, 1996. "VAR-ing the economy of the Netherlands," Working Papers 24, Centre for Economic Research, University of Groningen and University of Twente.
    18. Amir H. Alizadeh & Roar Os Ådland & Steen Koekebakker, 2007. "Predictive power and unbiasedness of implied forward charter rates," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 26(6), pages 385-403.
    19. Aka, F.B. & Decaluwé, B., 1999. "Causality and Comovement between Tax Rate and Budget Deficits: Further Evidence from Developing Countries," Cahiers de recherche 9911, Université Laval - Département d'économique.
    20. Bakari, Sayef & Fakraoui, Nissar & Mabrouki, Mohamed, 2020. "The Contribution of Domestic Investment, Exports and Imports on Economic Growth: A Case Study of Peru," MPRA Paper 99041, University Library of Munich, Germany.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:jfeppp:v:3:y:2011:i:2:p:161-174. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Emerald Support (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.