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Elimination of the Coffee Export Quota System Revisited: Evaluating International-to-

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  • Lee, Jun
  • Gómez, Miguel I.

Abstract

We revisit the impact of the International Coffee Agreement (ICA) on international-to-retail price transmission. We account for two distinct dimensions (e.g. symmetry vs. asymmetry and linearity vs. nonlinearity) of price transmission from international to retail coffee prices in France, Germany and the United States. We show that ignoring these two features of the price transmission process may lead to misleading impact assessments of the ICA elimination in 1990. Our results confirm the presence of threshold effects in price transmission in both periods (ICA and post-ICA) in the three countries. Our estimates show that, in the long-run, the speed of adjustment toward equilibrium becomes faster during the post-ICA period in France and Germany. Our results suggest that, for France and Germany, changes in international prices did not influence retail prices in the short-run during the ICA period; in contrast, retail prices responded to changes in international prices in the post-ICA period. We find differences between the two European countries and the United States. Our results indicate that changes in international prices influenced U.S. retail prices in both periods. Nonlinear impulse response analysis indicates that ICA elimination increased the speed of adjustment toward the long-run equilibrium, given a shock in international coffee prices. Overall, our results show that ignoring nonlinearities and asymmetries in price transmission may lead to incorrect impact assessment of policies affecting global agricultural supply chains.

Suggested Citation

  • Lee, Jun & Gómez, Miguel I., 2011. "Elimination of the Coffee Export Quota System Revisited: Evaluating International-to-," 2011 Conference, April 18-19, 2011, St. Louis, Missouri 285357, NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    • Handle: RePEc:ags:nccc11:285357
    DOI: 10.22004/ag.econ.285357
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