Price dependence between coffee qualities: a copula model to evaluate asymmetric responses

The objective of this paper is to assess the degree and the structure of price dependence between different coffee qualities of the Arabica and Robusta varieties. This is pursued using the statistical tool of copulas and monthly price data for the period 1990:1{2014:12. Our results reveal evidence of asymmetric price dependence between the pairs Brazilian-Robusta, Brazilian-Others and Robusta-Others, since price booms and price crashes are transmitted with different probabilities between these pairs of coffee qualities. For the pairs Brazilian-Colombian, Colombian-Robusta and Colombian-Others there is no evidence of asymmetric price dependence. The empirical findings of this article indicate that the probability that fairtrade coffee producers will see a price crash in the Robusta variety being transmitted to the coffee qualities of the Arabica variety is either zero or much lower than the probability of the transmission of a price boom