Fundamentals, speculation or macroeconomic conditions? Modelling and forecasting Arabica coffee prices

Jesus Crespo Cuaresma, Jaroslava Hlouskova and Michael Obersteiner

European Review of Agricultural Economics, 2018, vol. 45, issue 4, 583-615

Abstract: We analyse the role played by market fundamentals, speculation and macroeconomic conditions as empirical determinants of price changes in Arabica coffee. We combine model averaging techniques to explain historical patterns with an in-depth analysis of out-of-sample predictability of Arabica coffee prices using fundamentals as well as macroeconomic and financial variables. Our results indicate that variables related to global macroeconomic and financial developments contain valuable information to explain the historical pattern of coffee price developments, as well as to improve out-of-sample predictions.

Keywords: commodity prices; coffee; forecasting; forecast combination; vector autoregressive models; model uncertainty; model averaging (search for similar items in EconPapers)
Date: 2018
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