Bio-fuels? Across financial tsunami of 2008

摘要

The relation between prices of crude oil and grain futures was explored in this research to identify the argument about production of bio-fuels and skyrocketing grains prices. Chow breakpoint test and Quandt-Andrews unknown breakpoint test were used to examine whether the financial tsunami of 2008 resulted in any structural changes. July 15, 2008 was the breakpoint and the duration was divided into two parts. Paired variables were tested by VECM between oil and grain futures prices. The testing results of the duration from January 1, 1991 to July 14, 2008 were significant and a relationship between oil and grain prices existed indeed approving the aspect that bio-fuels cause the rising grain prices. However, the testing results after the structural changes during the financial tsunami in 2008 were insignificant completely denying the viewpoint that bio-fuels cause the rocketing grain prices.