Producer price and price transmission in a deregulated Ethiopian coffee market
AbstractCoffee producers in Ethiopia have historically received a very small share of the export price of green coffee. Reasons that are often mentioned are heavy government intervention and high marketing and processing costs. Prior to 1992, government regulation of the domestic coffee market in the form of fixed producer prices and the monopoly power of the Ethiopian Coffee Marketing Corporation put a substantial wedge between the producer price and the world price of coffee by imposing an implicit tax on producers. The domestic coffee marketing system in Ethiopia was liberalised after 1992, which was envisaged to have a positive effect on producer prices and price transmission signals from world markets to producers. This paper, with the help of Cointegration and Error-Correction Model (ECM), attempts to analyse its impact. As findings indicate, the reforms induced stronger long-run relationships among grower, wholesaler and exporter prices. The estimation of the ECM shows that the short-run transmission of price signals from world to domestic markets has improved, but has remained weak in both auction-to-world and producer-to-auction markets. This might be explained by the weak institutional arrangement coordinating the domestic coffee system and contract enforcement. In general, the domestic price adjusts more rapidly to world price changes today than it did prior to the reforms. However, there is an indication that negative price changes transmit much faster than positive ones.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Agricultural Economics Association of South Africa (AEASA) in its journal Agrekon.
Volume (Year): 47 (2008)
Issue (Month): 4 (December)
market deregulation; producer price; price transmission; price asymmetry;
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Richardson, J. David, 1978. "Some empirical evidence on commodity arbitrage and the law of one price," Journal of International Economics, Elsevier, vol. 8(2), pages 341-351, May.
- John Baffes & Bruce Gardner, 2003. "The transmission of world commodity prices to domestic markets under policy reforms in developing countries," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 6(3), pages 159-180.
- Krivonos, Ekaterina, 2005.
"The impact of coffee market reforms on producer prices and price transmission,"
2005 Annual meeting, July 24-27, Providence, RI
19315, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
- Krivonos, Ekaterina, 2004. "The impact of coffee market reforms on producer prices and price transmission," Policy Research Working Paper Series 3358, The World Bank.
- Christopher B. Barrett, 1996. "Market Analysis Methods: Are Our Enriched Toolkits Well Suited to Enlivened Markets?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(3), pages 825-829.
- Stigler, George J & Sherwin, Robert A, 1985.
"The Extent of the Market,"
Journal of Law and Economics,
University of Chicago Press, vol. 28(3), pages 555-85, October.
- George J. Stigler & Robert A. Sherwin, 1983. "The Extent of the Market," University of Chicago - George G. Stigler Center for Study of Economy and State 31, Chicago - Center for Study of Economy and State.
- Abdulai, Awudu, 2000. "Spatial price transmission and asymmetry in the Ghanaian maize market," Journal of Development Economics, Elsevier, vol. 63(2), pages 327-349, December.
- Arslan, Aslıhan & Reicher, Christopher Phillip, 2010.
"The Effects of the Coffee Trademarking Initiative and Starbucks Publicity on Export Prices of Ethiopian Coffee,"
Proceedings of the German Development Economics Conference, Hannover 2010
22, Verein für Socialpolitik, Research Committee Development Economics.
- Aslihan Arslan & Christopher P. Reicher, 2011. "The Effects of the Coffee Trademarking Initiative and Starbucks Publicity on Export Prices of Ethiopian Coffee," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 20(5), pages 704-736, November.
- Aslihan Arslan & Christopher P. Reicher, 2010. "The Effects of the Coffee Trademarking Initiative and Starbucks Publicity on Export Prices of Ethiopian Coffee," Kiel Working Papers 1606, Kiel Institute for the World Economy.
- Boansi, David & Crentsil, Christian, 2013.
"Competitiveness and determinants of coffee exports, producer price and production for Ethiopia,"
48869, University Library of Munich, Germany.
- David BOANSI & Christian CRENTSIL, 2013. "Competitiveness and Determinants of Coffee Exports, Producer Price and Production for Ethiopia," Journal of Advanced Research in Economics and International Business, ASERS Publishing, vol. 1(1), pages 31-56, August.
- Subervie, Julie, 2011. "Producer price adjustment to commodity price shocks: An application of threshold cointegration," Economic Modelling, Elsevier, vol. 28(5), pages 2239-2246, September.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.