Abstract
This paper examines the price transmission mechanisms between domestic ethanol and imported ethanol in the US market using a multivariate Johansen approach. The data and model support one cointegrating relationship between the prices of domestically produced ethanol, imported ethanol, and other relevant products (gasoline, crude oil, and corn). The rejection of weak exogeneity of the imported ethanol price and corn price implies that these two prices would adjust to changes in the price linkage. Those empirical findings indicate that the impact of eliminating trade barriers on the imported ethanol price would spillover to the domestic ethanol price and subsequently to corn price.
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