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Forecasting the spot prices of various coffee types using linear and non-linear error correction models

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posted on 2005-08-12, 12:54 authored by Costas Milas, Jesus Otero, Theodore Panagiotidis
This paper estimates linear and non-linear error correction models for the spot prices of four different coffee types. In line with economic priors, we find some evidence that when prices are too high, they move back to equilibrium more slowly than when they are too low. This may reflect the fact that, in the short run, it is easier for countries to restrict the supply of coffee in order to raise prices, rather than increase supply in order to reduce them. Further, there is some evidence that adjustment is faster when deviations from the equilibrium level get larger. Our forecasting analysis suggests that asymmetric and polynomial error correction models offer weak evidence of improved forecasting performance relative to the random walk model.

History

School

  • Business and Economics

Department

  • Economics

Pages

218444 bytes

Publication date

2003

Notes

Economics Research Paper, no. 03-14

Language

  • en

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