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Modelling Thirty Five Years of Coffee Prices in Brazil, Guatemala and India and the Law of One Price

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  • Anindya Banerjee
  • Sushil Mohan
  • Bill Russell

Abstract

The standard approach to modelling coffee prices ignores the impact that changes in government policies and market structures has on coffee prices. These changes have led to large structural breaks in coffee prices implying the standard estimates are biased. This paper models coffee princes in Brazil, Guatemala and India allowing for the structural breaks. The estimated model provides a consistent description of coffee prices and shows that liberalisation has benefited producers substantially in terms of a higher share of the world price of coffee. We also show that producers have benefited from higher real coffee prices following liberalisation.

Suggested Citation

  • Anindya Banerjee & Sushil Mohan & Bill Russell, 2010. "Modelling Thirty Five Years of Coffee Prices in Brazil, Guatemala and India and the Law of One Price," Discussion Papers 10-22, Department of Economics, University of Birmingham.
    • Handle: RePEc:bir:birmec:10-22
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    References listed on IDEAS

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    1. Winter-Nelson, Alex & Temu, Anna, 2002. "Institutional Adjustment and Transaction Costs: Product and Inputs Markets in the Tanzanian Coffee System," World Development, Elsevier, vol. 30(4), pages 561-574, April.
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    More about this item

    Keywords

    coffee prices; cointegration; coffee markets; liberalisation; coffee producers; transfer costs; law of one price;
    All these keywords.

    JEL classification:

    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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