THE PRICES CO-MOVEMENT BETWEEN WEST TEXAS CRUDE OIL AND CHINA'S BIOFUEL CROPS

The present paper examines the prices co-movement between West Texas crude oil and China's biofuel crops including soya, corn, wheat, cotton and sugar. Specifically, piecewise cointegration model is developed via hybrid neural network approach which can test the structural change of the linkages without prior knowledge of the input data distribution. And then a comparative framework is applied to identify changes in linkages through time and cointegration methodologies and causality tests are employed. Our results indicate that there is no long term co-movement between the oil and the biofuel crops futures pairs. However, our analysis identified that there is uni-directional short run causality between the oil and the biofuel crops futures pairs most of the time, that being said, China's biofuel crops futures prices are often unilaterally led by West Texas crude oil in short run. Furthermore, our findings also indicate that the short run causality changed in different periods.