Foods, fuels or finances: Which prices matter for biofuels?
|Author(s):|| prof. Ing. Karel Janda M.A., Dr., Ph.D., Zilberman, David|
prof. PhDr. Ladislav Krištoufek Ph.D., Zilberman, David
|ISSN / ISBN:||2206-0332|
|Published in:||CAMA Working Paper 63/2016|
|Keywords:||biofuels, prices, minimum spanning tree, wavelet coherence|
|JEL codes:||C22, C38, Q16, Q42|
|Abstract:||We examine co-movements between biofuels and a wide range of commodities and assets in the US, Europe, and Brazil. We analyze a unique dataset of 33 commodities
and relevant assets (between 2003 and 2016) which is unprecedented in the biofuels literature. We combine the minimum spanning trees correlation filtration to detect the
most important connections of the broad analyzed system with continuous wavelet analysis which allows for studying dynamic connections between biofuels and relevant commodities and assets and their frequency characteristics as well. We confirm that for the Brazilian and US ethanol, their respective feedstock commodities lead the prices of
biofuels, and not vice versa. This dynamics remains qualitatively unchanged when controlling for the influence of crude oil prices. As opposed to the Brazilian and US
ethanol, the European biodiesel exhibits only moderate ties to its production factors. We show that financial factors do not significantly interact with biofuel prices.