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An Economic Concept for Measuring Price Uncertainty: The Case of the World Coffee Market

Author

Listed:
  • Herrmann, R.
  • Kirschke, D.

Abstract

World markets for agricultural commodities are faced with increasing price fluctuations. When measuring these fluctuations, most researchers have focused on the construction of instabilty indicators not directly related to economic theory. In this article, a concept for measuring price uncertainty is presented that is explicitly based on economic reasoning. The economic meaning of price uncertainty is elaborated theoretically. The extent of price uncertainty is then measured for the world coffee market. An economic market model is used for estimating the deterministic part of the coffee price series. The paper shows that price uncertainty cannot be measured objectively but is dependent on the particular knowledge of the market analyst about the detrministic structure of the market considered.

Suggested Citation

  • Herrmann, R. & Kirschke, D., 1987. "An Economic Concept for Measuring Price Uncertainty: The Case of the World Coffee Market," 1987 Occasional Paper Series No. 4 197440, International Association of Agricultural Economists.
    • Handle: RePEc:ags:iaaeo4:197440
    DOI: 10.22004/ag.econ.197440
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