To explain the value added along the coffee commodity chain we propose and estimate a theoretical model of the coffee commodity chain. The theoretical model consists of four markets and five agents in the coffee commodity chain and predicts that prices in the coffee commodity chain move together but are also influenced by income, technology and production. A vector error correction model is used to test the theoretical predictions. In addition to the theoretical conclusions the empirical model confirms the beneficial role of the International Coffee Agreement and the importance of the level of production in determining coffee prices.
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Paper provided by Monash University, Department of Economics in its series Monash Economics Working Papers with number
06/08.
Find related papers by JEL classification: F02 - International Economics - - General - - - International Economic Order; Noneconomic International Organizations;; Economic Integration and Globalization: General Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business F14 - International Economics - - Trade - - - Country and Industry Studies of Trade
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