Farm Acreage Shocks and Crop Prices: An SVAR Approach to Understanding the Impacts of Biofuels

Hausman, Catherine; Auffhammer, Maximilian; Berck, Peter
September 2012
Environmental & Resource Economics;Sep2012, Vol. 53 Issue 1, p117
Academic Journal
The last 10 years have seen tremendous expansion in biofuels production, particularly in corn ethanol in the United States, at the same time that commodity prices (e.g., corn) have experienced significant spikes. While supporters claim that biofuels are renewable and carbon-friendly, concerns have been raised about their impacts on land use and food prices. This paper analyzes how US crop prices have responded to shocks in acreage supply; these shocks can be thought of as a shock to the residual supply of corn for food. Using a structural vector auto-regression framework, we examine shocks to a crop's own acreage and to total cropland. This allows us to estimate the effect of dedicating cropland or non-crop farmlands to biofuels feedstock production. A negative shock in own acreage leads to an increase in price for soybeans and corn. Our calculations show that increased corn ethanol production during the boom production year 2006/2007 explains approximately 27% of the experienced corn price rise.


Related Articles

  • The international wealth channel: a global error-correcting analysis. Holinski, Nils; Vermeulen, Robert // Empirical Economics;Dec2012, Vol. 43 Issue 3, p985 

    This article investigates empirically whether shocks to asset prices transmit into the trade balance through consumption and investment for a group of five of the world's most industrialized countries. We refer to this transmission channel as the international wealth channel and estimate a GVAR...

  • Did monetary or technology shocks move euro area stock prices? Berg, Tim // Empirical Economics;Oct2012, Vol. 43 Issue 2, p693 

    Using a Bayesian vector autoregressive (VAR) model, I investigate the impact of monetary and technology shocks on the euro area stock market. I find an important role for technology surprise shocks, but not monetary shocks, in explaining variations in real stock prices. Specifically, the...

  • Theoretical Channels Of International Transmission During The Subprime Crisis To OECD Countries:A FAVAR Model Under Bayesian Framework. KAABIA, Olfa; ABID, Ilyes // Journal of Applied Business Research;Mar/Apr2013, Vol. 29 Issue 2, p443 

    This paper studies whether and how U.S. shocks are transmitted to other OECD economies in the case of the Subprime Crisis. Using a large data set of 119 major financial and macroeconomic variables in 17 OECD countries from 1980. Q1 to 2006. Q2, we characterize the transmission channels by the...

  • The Impact of ICT Shocks on Business Cycle Some Evidence from Iran. Samimi, Ahmad Jafari; Roshan, Yosof Essazadeh // Iranian Economic Review;Winter2012, Vol. 16 Issue 31, p123 

    In this paper, we investigate empirically the effect of Information and Communication Technologies (ICT) and monetary shocks as sources of business cycle in the economy of Iran. We follow of Gali's (1999) who proposes identifying technology shocks by a bivariate structural vector auto regression...

  • Ethanol Still a Major Source of Inflationary Pressure. ENIS, MATTHEW // SN: Supermarket News;2/21/2011, Vol. 59 Issue 8, p10 

    The article offers the author's views on the agricultural forecasts for 2020 made by the U.S. Department of Agriculture (USDA). The USDA expects food prices to increase faster in the next two years than the general inflation rate. It estimates that 36 percent of total corn grown in the U.S. will...

  • On the Influence of Oil Price Shocks on Economic Activity, Inflation, and Exchange Rates. Yoshizaki, Yasunori; Hamori, Shigeyuki // International Journal of Financial Research;Apr2013, Vol. 4 Issue 2, p33 

    In this paper, we investigate the effects of oil price shocks on the production, price level, and exchange rate of eight important industrialized countries, using a two-step approach based on a structural VAR model of the global crude oil market proposed by Kilian (see American Economic Review,...

  • Responses to Interest Rate Changes: A Comparison between Domestic and Foreign Commercial Banks in Malaysia. Kassim, Salina Hj.; Manap, Turkhan Ali Abdul // Malaysian Journal of Economic Studies;Jun2012, Vol. 49 Issue 1, p21 

    This study aims to analyse the impact of interest rate changes on the domestic and foreign banks and determine its monetary policy implications. The study employed the impulse response functions and variance decomposition analysis based on the Vector Autoregression model to study the responses...

  • The Impact of External Shocks on Small Open Economies: Evidence from East Asian Countries. Thi Lien Hoa Nguyen; Thu Giang Tran; Thi Hong Minh Le // International Journal of Economics & Finance;Feb2014, Vol. 6 Issue 2, p206 

    In this paper, we investigate whether external shocks originating from the global economy as well as from the U.S. played an important role in macroeconomic fluctuations of East Asian countries during the period 2001-2012. We further check if these shocks lead to asymmetric or symmetric...

  • Choques macroeconómicos al sector externo. Evidencia para la Argentina (1980-2011). LANTERI, LUIS N. // Estudios de Economía Aplicada;Dec2012, Vol. 30 Issue 3, p1 

    This paper assesses the dynamics of the main macroeconomic shocks that could affect the trade balance and current account in the case of Argentina's economy. In particular, we measure the impact of international prices on both variables. The paper uses a structural VAR (SVAR), with long-term...


Read the Article


Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics