Journal Press India®

International Market Integration for Bioethanol

Vol 12 , Issue 1 , January - June 2011 | Pages: 113-121 | Research Paper  

https://doi.org/10.51768/dbr.v12i1.121201109


Author Details ( * ) denotes Corresponding author

1. * Miroslava R ajcaniova, Ph. D Research Scholar, Department of Economics, Faculty of Economics & Management, Slovak University of Agriculture in Nitra, Nitra, Slovakia
2. Erika Dobo, Doctoral Student, Szent Istvan University, Godallo, Hungary
3. Abha Kumar, Research Scholar, GGS Indraprastha University, Dwarka, Delhi, India
4. Mahesh Kumar Singh, Professor, Szent Istvan University, Godallo, Hungary
5. Judit Villanyi, Assistant Professor, Faculty of Economics and Socila Sciences, Szent Istvan University, Godallo, Hungary
6. Miklos Vasari, Assistant Professor, Faculty of Economics and Socila Sciences, Szent Istvan University, Godallo, Hungary

World Bioethanol fuel production reached 19.5 billion gallons in 2009 (RFA, 2010). The biggest producers of bioethanol are Brazil and USA, their joint production accounts for 89 percent of the world’s bioethanol fuel production in 2009.  Our focus is to identify and measure how prices of individual economies (Brazil, USA, and Europe) converge in the bioethanol market. This purpose necessitates the use of a time-series based approach. We evaluate the inter-relationship among the variables in a Vector Autoregression (VAR) and Impulse Response Function (IRF).  To achieve our goal, we first collected weekly data for bioethanol prices in Europe, USA, and Brazil from January, 2000 to October, 2009. The results provide evidence of cointegration relationship between US bioethanol prices and Brazil bioethical prices, but no cointegration between the prices of bioethanol in Europe and Brazil or Europe and USA.  As a result, we used a VAR model on first differences. With the help of Impulse Response Function, we found out that the impact of the price shock of one variable on the other variables is small and the prices of bioethanol in analyzed countries seem  to go back  to their initial level in a five-week period.

Keywords

Bioethanol Price, Market Integration, Vector Autoregression.

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