Estimating Ethanol-Corn-Oil price relations in the US market with Smooth Transition Vector Error Correction Models

This paper investigates price relations between ethanol, corn and oil. We find that a significant cointegrating relationship exists between corn and ethanol. Furthermore we use non-linear Smooth Transition Vector Error Correction Models to estimate long-run and short-run price behavior. With GR functions we visualize the effects of price shocks to the commodities on the prices of the other commodities. Our findings are in line with the idea that ethanol can have an upward price effect on corn prices.