Food Versus Fuel: Causality and Predictability in Distribution

35 Pages Posted: 19 Jul 2013 Last revised: 21 Mar 2015

See all articles by Andrea Bastianin

Andrea Bastianin

University of Milan; Fondazione Eni Enrico Mattei

Marzio Galeotti

University of Milan - Department of Environmental Science and Policy (ESP); Fondazione Eni Enrico Mattei (FEEM); GREEN - Centre for Research on Geography, Resources, Environment, Energy & Networks

Matteo Manera

University of Milan-Bicocca, Italy - Department of Economics, Management and Statistics (DEMS); Fondazione Eni Enrico Mattei (FEEM), Milan, Italy

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Date Written: March 1, 2013

Abstract

This paper examines the relationship between biofuels and commodity food prices in the U.S. from a new perspective. While a large body of literature has tried to explain the linkages between sample means and volatilities associated with ethanol and agricultural price returns, little is known about their whole distributions. We focus on predictability in distribution by asking whether ethanol returns can be used to forecast different parts of field crops returns distribution, or vice versa. Density forecasts are constructed using Conditional Autoregressive Expectile models estimated with Asymmetric Least Squares. Forecast evaluation relies on quantile-weighed scoring rules, which identify regions of the distribution of interest to the analyst. Results show that both the centre and the left tail of the ethanol returns distribution can be predicted by using field crops returns. On the contrary, there is no evidence that ethanol can be used to forecast any region of the field crops distribution.

Keywords: Biofuels, Ethanol, Field Crops, Density Forecasting, Granger Causality, Quantiles

JEL Classification: C22, C53, Q13, Q42, Q47

Suggested Citation

Bastianin, Andrea and Galeotti, Marzio and Manera, Matteo, Food Versus Fuel: Causality and Predictability in Distribution (March 1, 2013). University of Milan Bicocca Department of Economics, Management and Statistics Working Paper No. 241, Available at SSRN: https://ssrn.com/abstract=2295116 or http://dx.doi.org/10.2139/ssrn.2295116

Andrea Bastianin

University of Milan ( email )

Via Conservatorio, 7
Milan, 20122
Italy

HOME PAGE: http://https://www.unimi.it/it/ugov/person/andrea-bastianin

Fondazione Eni Enrico Mattei ( email )

C.so Magenta 63
Milano, 20123
Italy

Marzio Galeotti

University of Milan - Department of Environmental Science and Policy (ESP) ( email )

2 via Celoria
Milano, 20133
Italy
+39-2-50316470 (Phone)
+39-2-50316486 (Fax)

HOME PAGE: http://www.unimi.it/chiedove/cv/ENG/marzio_galeotti.pdf?1531977155891

Fondazione Eni Enrico Mattei (FEEM) ( email )

Corso Magenta 63
Milan, 20123
Italy

HOME PAGE: http://www.feem.it

GREEN - Centre for Research on Geography, Resources, Environment, Energy & Networks ( email )

via Rontgen
Milan, 20123
Italy

HOME PAGE: http://https://www.green.unibocconi.eu

Matteo Manera (Contact Author)

University of Milan-Bicocca, Italy - Department of Economics, Management and Statistics (DEMS) ( email )

Via Bicocca degli Arcimboldi, 8
Milan, 20126
Italy
+39 02 6448 5819 (Phone)
+39 02 6448 5878 (Fax)

HOME PAGE: http://www.matteomanera.it

Fondazione Eni Enrico Mattei (FEEM), Milan, Italy ( email )

Corso Magenta, 63
Milan, 20123
Italy
+39 02 520 36944 (Phone)

HOME PAGE: http://www.feem.it

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