On the co-movement between coffee and cocoa prices in international markets

Traoré, F and Badolo, F (2016) On the co-movement between coffee and cocoa prices in international markets. Applied Economics. 01-10. ISSN 0003-6846

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Abstract

In this article, we study the movement between cocoa and coffee prices, two close substitute commodities. Using the ARDL approach developed by Pesaran et al. (2001), we found that the two prices are cointegrated. The long-run elasticity of coffee price with respect to the cocoa one is estimated at 0.88. Also, using the lag-augmented VAR approach of Toda and Yamamoto (1995), which is valid whatever the order of integration of the data, the cocoa price is found to granger cause the coffee price and not vice versa. This finding suggests that models aiming at forecasting coffee prices should incorporate cocoa prices as well.

Item Type:	Article
Divisions:	RP-Market Institutions and Policies
CRP:	CGIAR Research Program on Policies, Institutions, and Markets (PIM)
Uncontrolled Keywords:	Coffee, cocoa, commodity prices, co-movement, Q02, Q11, C22, cocoa prices, coffee prices
Subjects:	Others
Depositing User:	Mr Ramesh K
Date Deposited:	10 May 2016 09:48
Last Modified:	10 May 2016 09:48
URI:	http://oar.icrisat.org/id/eprint/9505
Official URL:	http://dx.doi.org/10.1080/00036846.2016.1148254
Projects:	UNSPECIFIED
Funders:	CGIAR Research Program on Policies, Institutions, and Markets (PIM) led by the International Food Policy Research Institute (IFPRI)
Acknowledgement:	This work was undertaken as part of, and funded by, the CGIAR Research Program on Policies, Institutions, and Markets (PIM) led by the International Food Policy Research Institute (IFPRI). PIM is in turn supported by “http://www.pim. cgiar.org/%20donors/” these donors.
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