On the current account - biofuels link in emerging and developing countries: do oil price fluctuations matter?

Gabriel Gomes (), Emmanuel Hache, Valérie Mignon () and Anthony Paris

No 2017-30, EconomiX Working Papers from University of Paris Nanterre, EconomiX

Abstract: Many developed countries promote the use of biofuels for environmental concerns, leading to a rise in the price of agricultural commodities utilized in their production. Such environmental policies have major effects on the economy of emerging and developing countries whose activity is highly dependent on agricultural commodities involved in biofuel production. This paper tackles this issue by examining the price impact of biofuels on the current account for a panel of 16 developing and emerging countries, and the potential nonlinear effect exerted by the price of oil on this relationship. Relying on the estimation of panel smooth-transition regression models, we show that positive shocks in the price of biofuels lead to a current-account improvement for agricultural commodity exporters and producers only when the price of oil is below a certain threshold. When the price of oil exceeds this threshold, uctuations in the price of biofuels no longer affect the current account. These findings illustrate that a rise in the price of oil exerts a negative effect on the trade balance of commodity exporters which are also oil importers, dampening the biofuel price impact on the current-account position.

Keywords: Biofuels; Oil; Current account; Panel smooth transition regression. (search for similar items in EconPapers)
JEL-codes: C23 F32 Q16 Q43 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2017
New Economics Papers: this item is included in nep-agr, nep-ene and nep-env
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: On the current account - biofuels link in emerging and developing countries: do oil price fluctuations matter? (2018)
Working Paper: On the current account-biofuels link in emerging and developing countries: do oil price fluctuations matter? * (2018)
Working Paper: On the Current Account - Biofuels Link in Emerging and Developing Countries: Do Oil Price Fluctuations Matter? (2017)
Working Paper: On the current account - biofuels link in emerging and developing countries: do oil price fluctuations matter? (2017)
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