Price volatility in ethanol markets

Our paper looks at how price volatility in the Brazilian ethanol industry changes over time and across markets. Demand and supply forces in the energy and food markets are likely to ensure that crude oil, ethanol and feedstock prices co-move in the long-run. Hence, when assessing price volatility changes and spillovers in the ethanol industry, one should also pay attention to the notion of cointegration. Until recently, the methods proposed to estimate cointegration relationships, have not explicitly considered time varying volatility in the data. Seo (2007) suggests an estimator of the cointegration vector that explicitly models conditional heteroskedasticity. More specifically, he proposes a maximum likelihood estimator that estimates the error correction model and the multivariate GARCH process jointly. We follow this proposal.

Issue Date:
Publication Type:
Conference Paper/ Presentation
Record Identifier:
PURL Identifier:
Total Pages:
JEL Codes:
Q11; C32
Series Statement:
Contributed paper

 Record created 2017-04-01, last modified 2018-01-22

Download fulltext

Rate this document:

Rate this document:
(Not yet reviewed)