The volatile coffee price and its effects on Guatemala’s economy

Abstract: The purpose with this thesis is to determine the effects of a volatile
coffee price on Guatemala’s export revenues and analyze the effects on the
economic growth. The scope for the thesis is based upon the current
situation on the coffee market. The price on coffee has not been as low as
it is today in more than a century. This situation is causing large problems
in a country like Guatemala when the crop accounts for 22,9 percent of the
total export revenues. To reveal the effects of a volatile coffee price on
the export revenues I use a multiple regression model where the export
revenues is the dependent variable and the price on coffee, exchange rate
and the quantity of coffee produced in Guatemala as the independent
variables. The conclusion is that the volatile coffee price has a large
effect on the revenues. If the coffee price rises with 1 percent, export
revenues will rise with 1,089 percent, ceteris paribus. The economic growth
in Guatemala is also dependent on the coffee production and if the coffee
price is low, Guatemala will have a slower economic growth.