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Internal price stabilization tools in the Colombian sugar market: Do they work?

Author

Listed:
  • Julio César Alonso Cifuentes

    (Universidad Icesi)

  • Andrés Mauricio Arcila Vásquez

    (Universidad Icesi)

  • Sebastián Montenegro Arana

    (Universidad de Texas)

Abstract

Since 2001, local sugar prices in Colombia are subject to the Sugar Price Stabilization Fund (FEPA). The Colombian government designed FEPA to protect local producers from fluctuations in international sugar prices, complementing the existing Andean Price Band System (SAFP) of the Andean Community of Nations. This paper aims to determine whether the FEPA, joint with SAFP, have isolated the local price from fluctuations in the international sugar price. To this end, we determine whether or not a long-term relationship exists between international sugar prices and local prices in the three main cities of Colombia. Using monthly data for the period 2001-2015, we did not find evidence of cointegration between the international prices and the local prices in each of the studied cities. We then conclude that the FEPA and SAFP have succeeded in isolating the effect of international prices on domestic prices.

Suggested Citation

  • Julio César Alonso Cifuentes & Andrés Mauricio Arcila Vásquez & Sebastián Montenegro Arana, 2017. "Internal price stabilization tools in the Colombian sugar market: Do they work?," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 86, pages 105-126, Enero - J.
    • Handle: RePEc:lde:journl:y:2017:i:86:p:105-126
    DOI: 10.17533/udea.le.n86a04
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    References listed on IDEAS

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    More about this item

    Keywords

    FEPA; Andean Price Band System; cointegration; unit root; sugar.;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance

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