This paper estimates the potential welfare effects for Ethiopian coffee producers from eliminating coffee price volatility. To estimate volatility the generalised autoregressive conditional heteroskedasticity (GARCH) technique is applied to monthly coffee prices in Ethiopia for the period 1976-2012. To distinguish between the unpredictable and predictable components of volatility we obtain separate estimates of the conditional and unconditional variance of the residual. This is combined with estimates of the coefficient of relative risk aversion (CRRA) drawn from the literature to measure the potential welfare effects from eliminating the unpredictable component of price volatility. Estimates of these welfare effects have important policy implications for the efficacy of price stabilisation and price risk management mechanisms for coffee and other primary commodity producers in developing countries.
|Number of pages||1|
|Publication status||Published - 12 Nov 2015|
|Event||Annual Conference of Centre for African Research on Enterprise and Economic Development (CAREED) : Africa: Proud History, Promising Future - University of the West of Scotland, Paisley PA1 2BE , Paisley, Glasgow , United Kingdom|
Duration: 12 Nov 2015 → 13 Nov 2015
Conference number: 1
|Conference||Annual Conference of Centre for African Research on Enterprise and Economic Development (CAREED)|
|Period||12/11/15 → 13/11/15|