Rice Price Volatility Measurement in Indonesia Using GARCH and GARCH-X Method (original) (raw)

2014

Abstract

There has been a significant development in food and other agricultural commodity prices over the past few years. Price movement seems to follow a typical pattern (Bobenrieth et al., 2012; Brummer et al., 2013; Huchet-bourdon, 2011; Prakash, 2011) such that the price increases with accelerating pace in one year followed by a sharp drop in the following year. Although in the recent decades, volatility has generally been lower but the variability has been high, with the important exception of rice (Gilbert and Morgan, 2010). This implies higher risks for both consumers and producers. To a commodity that holds strategic value such as rice in Indonesia, unpredictable shocks in price is highly undesirable. Indonesia has more than 32 million people who were still living on less than US$2 per day. This study aims to understand the volatility trend of rice price in Indonesia, by exploring some possible drivers and test the significant impact of those drivers to overall volatility measuremen...

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