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

Arbeitspapier

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 the study of 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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Nota di Lavoro ; No. 73.2016

Classification and Topics

• Classification: Wirtschaft ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models ; Economic Development: Agriculture; Natural Resources; Energy; Environment; Other Primary Products ; Commodity Markets ; Agriculture: Aggregate Supply and Demand Analysis; Prices ; Climate; Natural Disasters and Their Management; Global Warming
• Subject: Coffee ; Colombia ; El Niño ; ENSO ; La Niña ; Structural VAR

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bastianin, Andrea ; Lanza, Alessandro ; Manera, Matteo
• Event: Veröffentlichung
• (who): Fondazione Eni Enrico Mattei (FEEM)
• (where): Milano
• (when): 2016

Further information

• Handle: http://hdl.handle.net/10419/149999
• Last update: 10.03.2025, 11:44 AM CET