Food Versus Fuel: Causality and Predictability in Distribution

37 Pages Posted: 4 Apr 2013

See all articles by Andrea Bastianin

Andrea Bastianin

Università degli Studi di Milano-Bicocca - Department of Economics, Management and Statistics (DEMS); Università degli Studi di Milano-Bicocca - Center for European Studies (CefES)

Marzio Galeotti

University of Milan - Department of Environmental Science and Policy (DESP); Bocconi University - IEFE Centre for Research on Energy and Environmental Economics and Policy

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: April 2, 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 (April 2, 2013). FEEM Working Paper No. 23.2013. Available at SSRN: https://ssrn.com/abstract=2243415 or http://dx.doi.org/10.2139/ssrn.2243415

Andrea Bastianin

Università degli Studi di Milano-Bicocca - Department of Economics, Management and Statistics (DEMS) ( email )

Piazza dell'Ateneo Nuovo, 1
Milan, 20126
Italy

Università degli Studi di Milano-Bicocca - Center for European Studies (CefES)

U6 Building
Viale Piero e Alberto Pirelli, 22
Milano, 20126
Italy

Marzio Galeotti

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

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

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

Bocconi University - IEFE Centre for Research on Energy and Environmental Economics and Policy ( email )

via Rontgen
Milan, 20123
Italy
+39-2-58362340 (Phone)

HOME PAGE: http://www.iefe.unibocconi.it

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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