Economic Impacts of El Niño Southern Oscillation: Evidence from the Colombian Coffee Market

Andrea Bastianin, Alessandro Lanza () and Matteo Manera ()

Departmental Working Papers from Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano

Abstract: We develop a structural econometric model to study the impacts of El Niño Southern Oscillation (ENSO) on Colombian coffee production, exports and price. Our empirical specification is consistent with an economic model of the coffee market that, in the short-run, is characterized by a downward-sloping demand curve and by a vertical supply curve. This allows to study the effects of unpredictable innovations to ENSO on the Colombian coffee price, while controlling for shocks arising from both the supply and the demand-side of the market. We show that El Niño events (i.e. positive shocks to ENSO) might be beneficial for production and exports and tend to decrease the price of coffee. On the contrary, La Niña conditions (i.e. negative shocks to ENSO) depress coffee production and exports and increase price. However, the overall impact of ENSO shocks is small. In the short-run, ENSO shocks explain 2% of the fluctuations of coffee production and 0.2% of the variability of the price of coffee. In the long-run, these percentages rise to 8% and 6%, respectively. Both in the short-run and in the long-run, demand-side shocks are more relevant than supply-side shocks in explaining the dynamics of the price of coffee.

Keywords: Coffee; Colombia; El Niño; ENSO; La Niña; Structural VAR (search for similar items in EconPapers)
JEL-codes: C32 O13 Q02 Q11 Q54 (search for similar items in EconPapers)
Date: 2016-11-22
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Related works:
Journal Article: Economic impacts of El Niño southern oscillation: evidence from the Colombian coffee market (2018)
Working Paper: Economic impacts of El Niño Southern Oscillation: evidence from the Colombian coffee market (2018)
Working Paper: Economic Impacts of El Niño Southern Oscillation: Evidence from the Colombian Coffee Market (2016)
Working Paper: Economic Impacts of El Niño Southern Oscillation: Evidence from the Colombian Coffee Market (2016)
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