Co-Movements of Ethanol Related Prices: Evidence from Brazil and the USA

23 Pages Posted: 9 Apr 2015 Last revised: 20 Apr 2015

See all articles by Ladislav Kristoufek

Ladislav Kristoufek

Charles University

Karel Janda

Charles University in Prague - CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute)

David Zilberman

University of California, Berkeley - Department of Agricultural & Resource Economics

Date Written: April 1, 2015

Abstract

We use the wavelet coherence methodology to investigate relations between prices of ethanol and its feedstocks. Our continuous wavelet framework allows for discovering price connections and their evolution in both time and frequency domain in the most important ethanol markets – Brazil and the USA. For both of these markets we show that the long-run relationship between prices of ethanol and corn (in USA) or sugar (in Brazil) is positive, strong and stable in time. Importantly, we show that the prices of feedstock lead the prices of ethanol and not the other way around. The price lead of feedstock is documented for both short and long run horizons. Our qualitative results hold true even when the influence of crude oil prices is accounted for by utilizing partial wavelet coherence approach.

Keywords: ethanol, corn, sugar, oil, wavelet coherence

JEL Classification: C22, Q16, Q42

Suggested Citation

Kristoufek, Ladislav and Janda, Karel and Zilberman, David, Co-Movements of Ethanol Related Prices: Evidence from Brazil and the USA (April 1, 2015). CAMA Working Paper 11/2015. Available at SSRN: https://ssrn.com/abstract=2591707 or http://dx.doi.org/10.2139/ssrn.2591707

Ladislav Kristoufek

Charles University ( email )

Celetná 13
Praha 1, 116 36
Czech Republic

Karel Janda (Contact Author)

Charles University in Prague - CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute) ( email )

P.O. Box 882
7 Politickych veznu
Prague 1, 111 21
Czech Republic
+422 240 05 223 (Phone)
+422 242 11 374 (Fax)

HOME PAGE: http://www.cerge-ei.cz

David Zilberman

University of California, Berkeley - Department of Agricultural & Resource Economics ( email )

Berkeley, CA 94720
United States

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