Market Reforms and Commodity Price Volatility: The Case of East African Coffee Market

Abstract

The goal of this paper is to examine the impact of commodity market reforms on producer price volatility using evidence from the East African coffee market. The results, based on time‐varying volatility models and key summary statistics, show that coffee market reforms in the East African Community (EAC) are associated with changes in producer price volatility and volatility persistence at both country and regional levels. However, reforms were not the only cause of changes in price volatility. The study further shows that reforms had different effects on prices volatilities of Arabica and Robusta varieties of coffee grown in individual EAC countries. These findings have wider implication for commodity market reforms and producer price stabilisation policies in the EAC and coffee producing countries in sub‐Sahara Africa.

Identifying opportunities for value chain development in the Kenyan coffee sector

“…Incentives and disincentives to the coffee sector also determine its competiveness and export performance. In the global coffee market, Kenya is a price-taker and is highly vulnerable to global price shocks (Lukanima and Swaray, 2014).…”

When Unfair Trade Is Also at Home: The Economic Sustainability of Coffee Farms

“…There are many studies on price transmission generally addressing the relation between prices paid to coffee bean producers, and those paid to processing and/or retail firms [12][13][14][15][16]. They show asymmetrical transmission of price changes along the chain, indicating that retail and processor margins grow when there is an excess supply and a decrease in green coffee prices.…”

Fast & furious: Do psychological and legal factors affect commodity price volatility?

“…Price volatility could discourage investments and reduce economic and political stability. Food price volatility, for example, was judged accountable for the political unrest experienced by several countries (Bellemare, 2015; Etienne, Irwin, & Garcia, 2018; Ianchovichina, Loening, & Wood, 2014; Ivanic, Martin, & Zaman, 2012; World Bank, 2008), for the economic adversity among the poor and malnutrition among children in developing countries (Braun, 2020; von Braun, Algieri, & Kalkuhl, 2014; Brockhaus, Haile, & von Braun, 2018; Kalkuhl, von Braun, & Torero, 2016; Lukanima & Swaray, 2014). Furthermore, price volatility negatively affects employment, income, trade balance, inflation rate, tax revenue and business cycles (Silveira, dos Santos Maciel, Mattos, & Ballini, 2017).…”