Do energy prices stimulate food price volatility? Examining volatility transmission between US oil, ethanol and corn markets

Abstract

This paper examines volatility transmission in oil, ethanol and corn prices in the United States between 1997 and 2011. We follow a multivariate GARCH approach to evaluate the level of interdependence and the dynamics of volatility across these markets. The estimation results indicate a higher interaction between ethanol and corn markets in recent years, particularly after 2006 when ethanol became the sole alternative oxygenate for gasoline. We only observe, however, significant volatility spillovers from corn to ethanol prices but not the converse. We also do not find major cross-volatility effects from oil to corn markets. The results do not provide evidence of volatility in energy markets stimulating price volatility in grain markets.

Interdependencies between Biofuel, Fuel and Food Prices: The Case of the Brazilian Ethanol Market

“…However, the US biofuel industry has attracted more attention than the EU biofuels sector and the Brazilian biofuel markets [50][51][52][53][54][55][56][57][58][59][60][61][62]. In particular, the link between the sugar and energy markets and between ethanol and crude oil/gasoline markets was examined by four authors.…”

Transmission of Food Price Volatility from International to Domestic Markets: Evidence from Africa, Latin America, and South Asia

“…Moreover, similar to Gardebroek and Hernandez (2013) and Hernandez et al (2014), we derived impulse response functions for the estimated conditional volatilities to assess how a shock or innovation is transmitted from the international market to the domestic market and obtain the elasticity of domestic price volatility with respect to international price volatility.…”

Understanding Dynamic Conditional Correlations between Commodities Futures Markets

“…Many studies have investigated the correlations between the energy and non-energy commodities (Chang and Su, 2010;Du et al, 2011;Ji and Fan, 2012;Gardebroek and Hernandez, 2013;Ewing and Malik, 2013;Liu, 2014;Mensi et al, 2014;Charlot and Marimouto, 2014), as well as the correlations within the non-energy commodity markets (Sensoy, 2013;Lahiani et al 2014;Todorova et al, 2014). Their results mostly confirm the existence of correlations among commodity prices.…”