Mutual Responsiveness of Biofuels, Fuels and Food Prices
Kristoufek, L., K. Janda and D. Zilberman (2012). “Mutual Responsiveness of Biofuels, Fuels and Food Prices”, CAMA Working Paper 38/2012
35 Pages Posted: 17 Jul 2013
Date Written: August 1, 2012
We propose a new approach to analyze relationships and dependencies between price series. For the biofuels markets and the related commodities, we study their mutual responsiveness, which can be understood as price cross-elasticities. Several methodological caveats are uncovered and discussed. We find that both ethanol and biodiesel prices are responsive to their production factors as well as their substitute fossil fuels (ethanol with corn, sugarcane and the US gasoline; and biodiesel with soybeans and German diesel). Responsiveness of all significant pairs increased remarkably during the food crisis of 2007/2008. Causality tests further show that price changes in producing factors lead the changes in biofuels, yet for some price levels, the direction is reversed.
Keywords: Biofuels, Mutual responsiveness, Price cross-elasticity, Causality
JEL Classification: C22, Q16, Q42
Suggested Citation: Suggested Citation