Biodiesel profitability and linkages to the soybean oil market
Zahran, Hala
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https://hdl.handle.net/2142/45274
Description
Title
Biodiesel profitability and linkages to the soybean oil market
Author(s)
Zahran, Hala
Issue Date
2013-08-22T16:34:19Z
Director of Research (if dissertation) or Advisor (if thesis)
Irwin, Scott H.
Department of Study
Agr & Consumer Economics
Discipline
Agricultural & Applied Econ
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
M.S.
Degree Level
Thesis
Keyword(s)
Biodiesel
Mandate
vector error correction model
long run equilibrium
zero profit relationship
Abstract
This thesis investigates the relationship between soybean oil and biodiesel markets in the US
through a structural model and a time-series econometric model. A conceptual link is built based
on the theories of market efficiencies and implications of a binding mandate on supply and
demand. We hypothesize that a long run zero-profit relationship governs the biodiesel and
soybean oil pricing relationships. We test for this using a structural model based on an Iowa
biodiesel plant. We additionally use formal time series testing including Johansen Trace test and
a vector error correction model and the Kejriwal and Perron test. We find that under certain
policy conditions our hypothesis holds but not throughout the sample studied.
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