Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/98223
Year of Publication: 
2014
Series/Report no.: 
ZEF Discussion Papers on Development Policy No. 187
Publisher: 
University of Bonn, Center for Development Research (ZEF), Bonn
Abstract: 
Biofuels production has experienced rapid growth worldwide as one of several strategies to promote green energy economies. Indeed, climate change mitigation and energy security have been frequent rationales behind biofuel policies, but biofuels production could generate negative impacts, such as additional demand for feedstocks, and therefore for land on which to grow them, with a consequent increase in food commodity price. In this context, this paper examines the effect of biofuels and other economic and financial factors on daily returns of a group of commodity futures prices using Generalized Autoregressive Conditional Heteroskedasticity (GARCH) family models in univariate and multivariate settings. The results show that a complex of drivers are relevant in explaining commodity futures returns; more precisely, the Standard and Poor´s (S&P) 500 positively affects commodity markets, while the US/Euro exchange rate brings about a decline in commodity returns. It turns out, in addition, that energy market returns are significant in explaining commodity returns on a daily basis, while monetary liquidity does not. Finally, the GARCH model has shown that current variance is influenced more by its past values than by the previous day´s shocks, and there is high persistence, meaning that variance slowly decays and prompts a sluggish 'revert to the mean' The multivariate BEKK framework confirms the results of the univariate setting.
Subjects: 
futures returns
biofuels
univariate and multivariate GARCH
JEL: 
C58
G15
Q14
Q43
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.