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Competitiveness of Kenyan Coffee: The Price Volatility—Production Perspective

In: Impacting Society Positively Through Technology in Accounting and Business Processes

Author

Listed:
  • Richard Wamalwa Wanzala

    (University of Johannesburg)

  • Nyankomo Marwa

    (University of Johannesburg)

  • Elizabeth Nanziri

    (Stellenbosch University)

  • Lawrence Obokoh

    (University of Johannesburg)

Abstract

Coffee is Kenya’s fourth largest export crop, bringing in about US$0.23 billion in revenue from exports, supporting 700,000 households and providing jobs for over 100,000 people. Despite coffee’s significant contribution to Kenya’s economic development, the country’s production of coffee has been declining over time due to unstable coffee prices in the bifurcated global markets. Thus, the main objective of this study was to answer the following question: “What is the effect of coffee price volatility on Kenyan coffee’s competitiveness in the global market?” The coffee data for 21 coffee-producing nations worldwide from 1990 to 2018, which was used in this study to address the research question, was sourced from the International Coffee Organization and World Development Indicators. Price analysis, hedonic regression, and volatility models (GARCH, TARCH, and EGARCH) were used to analyze the data. Out of 18 Arabica coffee-producing nations, Kenya was ranked sixth in the study’s results for coffee production. Hedonic regression results show that the production of coffee, exports of coffee, exportable coffee, interest rates, and exchange rates are all negatively impacted by price volatility. Lastly, the study’s findings indicate the existence of a leverage effect, which implies that any change in the price of coffee reacts asymmetrically to both good and bad news regarding the volume of coffee traded on the global market. Thus, this study concludes that, to smooth out production, Kenyan policymakers should insulate coffee growers from the effects of price volatility.

Suggested Citation

  • Richard Wamalwa Wanzala & Nyankomo Marwa & Elizabeth Nanziri & Lawrence Obokoh, 2025. "Competitiveness of Kenyan Coffee: The Price Volatility—Production Perspective," Springer Proceedings in Business and Economics, in: Tankiso Moloi (ed.), Impacting Society Positively Through Technology in Accounting and Business Processes, pages 779-799, Springer.
    • Handle: RePEc:spr:prbchp:978-3-031-84885-8_43
    DOI: 10.1007/978-3-031-84885-8_43
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