Ethanol consumption in Brazil: Empirical facts based on persistence, seasonality and breaks

• The paper analyses consumption of sugar cane ethanol in Brazil.
• It uses long memory techniques, focusing on persistence and seasonality.
• Policy implications of the results obtained are presented.

This paper investigates the consumption of sugar cane ethanol in Brazil for the time period from January 2000 to December 2012. We examine ethanol and gasoline consumption along with the price ratio series. Two important features of the data are analyzed, in particular, its degree of persistence and the seasonality. The results show that the two series of consumption are fractionally integrated with orders of integration smaller than 1 implying that shocks in the series will disappear in the long run. On the other hand, the price ratio series displays an order of integration higher than 1 implying lack of mean reversion behavior. This suggests that strong policy measures must be adopted on prices in the event of shocks since they do not recover by themselves in the long run.