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Economic impacts of El Niño Southern Oscillation: evidence from the Colombian coffee market

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

MPRA Paper from University Library of Munich, Germany

Abstract: El Niño Southern Oscillation (ENSO) is a naturally occurring phenomenon that affects weather around the world. Past ENSO episodes have had severe impacts on the economy of Colombia. We study the influence of ENSO on Colombian coffee production, exports, and price. Our structural econometric specification is consistent with an economic model of the market for Colombian coffee which, in the short run, is characterized by a downward-sloping demand curve and by a vertical supply curve. We show that El Niño (i.e., positive shocks to ENSO) is beneficial for Colombian production and exports and decreases the real price of Colombian coffee. On the contrary, La Niña (i.e., negative shocks to ENSO) depresses Colombian coffee production and exports and increases price. However, the overall impact of ENSO shocks is small. Both in the short run and in the long run, shocks to international demand for Colombian coffee are more relevant than supply-side shocks in Colombia in explaining the dynamics of the price of Colombian coffee. Our results suggest that a given coffee price shock can have beneficial, detrimental, or negligible effects on the Colombian economy, depending on its underlying cause. As a consequence, policy responses to coffee price shocks should be designed by looking at the causes of the shocks.

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)
New Economics Papers: this item is included in nep-agr, nep-dev and nep-env
Date: 2018
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Published in Agricultural Economics 5.49(2018): pp. 623-633

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Related works:
Journal Article: Economic impacts of El Niño southern oscillation: evidence from the Colombian coffee market (2018) Downloads
Working Paper: Economic Impacts of El Niño Southern Oscillation: Evidence from the Colombian Coffee Market (2016) Downloads
Working Paper: Economic Impacts of El Niño Southern Oscillation: Evidence from the Colombian Coffee Market (2016) Downloads
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