Impact of China’s Coffee Demand on International Coffee Prices (1995–2023): An ARDL–VAR Approach (#1386)

Authors

Fernandez Pacheco, Doniris Dianith

Abstract

This study examines the long- and short-run relationship between the international coffee price, China’s coffee imports (HS 0901), the joint production of Brazil and Vietnam, and the USD/CNY exchange rate over the period 1995–2023. Annual data from official sources (ICO, USDA–PSD, UN Comtrade/OEC.World, and FRED) are employed, transformed into natural logarithms, the study implements ARDL–ECM and VAR models within a cointegration framework. The Bounds Test results indicate the existence of a long-run equilibrium relationship among the variables, in which the combined production of Brazil and Vietnam exerts a negative and statistically significant effect on prices, while the USD/CNY exchange rate emerges as a key macrofinancial determinant. China’s imports display the expected sign but are not statistically significant in the long run, suggesting an emerging role that is still consolidating. The error-correction term indicates that approximately 40% of deviations from the long-run equilibrium are corrected annually, and the VAR analysis together with impulse response functions and variance decomposition confirms the central importance of supply shocks and the exchange-rate channel. These findings have relevant implications for producing countries such as Honduras, highlighting the need for differentiation strategies, exchange-rate risk management, and the design of trade policies grounded in the joint dynamics of global supply, Chinese demand, and international financial conditions.