The Evolution of the Ethanol and the Related Markets in the U.S.

This dissertation comprises three substantial chapters that analyse the impact of the U.S. ethanol market on other related markets, specifically the corn and oil markets. Chapter 3 models ethanol price asymmetry changes in demand and supply. We find that both demand and supply are relatively inelastic and both asymmetric and we discuss the policy implications of such results. Chapter 4 approaches the issue of connectedness among ethanol production, corn prices, and oil prices, together with the direct impact that ethanol production has on corn prices. We find in our connectedness analysis for the ethanol boom period that corn's position is improved as the ethanol market matures after the introduction of ethanol-blending mandates. Furthermore, ethanol production shows a dependent position that is due to the relatively small proportion it has on the fuel market. In contrast to apriori expectations, we do not find conclusive evidence to support the claims that ethanol production impacts corn prices. Chapter 5 continues to analyse the potential impact of ethanol prices by addressing the interrelation of price volatilities between corn, ethanol and oil prices in the U.S. ethanol market. We find that there are no statistical significant cross effects from ethanol prices to corn prices. For the pre-ethanol boom period, we find a double-directional significant cross-spillover effect from oil to ethanol which we expect for these two markets given their link through the blending mandates. In the ethanol boom period, however, we find that the own volatility effects are statistically significant only for oil, and a small significant cross-spillover effect from corn to oil, which suggests the position of corn as an energy crop is strengthening in the fuel market