Nonlinearities in the US corn-ethanol-oil price system

We use a smooth transition vector error correction model to assess price relationships within the US ethanol industry. Daily ethanol, corn and oil futures prices observed from mid-2005 to mid-2007 are used in the analysis. Results indicate the existence of an equilibrium relationship between ethanol, corn and oil prices. However, only ethanol prices adjust, in a non-linear fashion, to deviations from this long-run parity. Generalized impulse response functions indicate that a shock to both oil and corn prices causes a change in ethanol prices of the same sign. Ethanol responses usually reach a peak after about 10 days of the initial shock and fade away within 35 days.


Issue Date:
2008
Publication Type:
Conference Paper/ Presentation
PURL Identifier:
http://purl.umn.edu/6512
Total Pages:
23
Series Statement:
Selected Paper
464896




 Record created 2017-04-01, last modified 2017-05-15

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