Volatility in Agriculture Commodity Prices in India: Impact and Macroeconomic and Sector-Specific Policy Responses
AbstractGlobalization and trade liberalization have exposed agricultural sector of many developing countries to sudden disturbances, caused not just by demand-supply conditions within their economies but also by volatility in global commodity prices, exchange rate and surge in imports. This paper evaluates the magnitude of sensitivity of Indian agriculture to these factors, and explores policy options that may neutralize their adverse effects, maintain price incentives and stability. The analysis is undertaken for one important tradable commodity viz. wheat by applying a structural econometric model, separately under the exportable and importable scenarios from 1980-81 to 2009-10. Findings reveal wheat to be increasingly driven by an incentive structure based on its linkages with world price, exchange rate and other factors. Counterfactual simulation experiments indicate that due to trade and sector-specific policies, wheat price and output tend to be much more resilient to fluctuations in international price and other shocks compared to its exports and imports.
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Bibliographic InfoPaper provided by European Association of Agricultural Economists in its series 123rd Seminar, February 23-24, 2012, Dublin, Ireland with number 122543.
Date of creation: 23 Feb 2012
Date of revision:
Agricultural trade; Price transmission; Volatility; Macroeconomic policies; International Relations/Trade; Risk and Uncertainty; Q17; C22; E69; E60;
Find related papers by JEL classification:
- Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- E69 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Other
- E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
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