Supply Response Of Boro Rice In Bangladesh: Cointegraton And Error Correction Modelling Approach

The aim of this study is to increase our understanding of the specification and estimation of Boro rice (principal rice) supply response in Bangladesh as well as to provide instrument for agriculture planting decision and price policy by using econometric tools-cointegration and error correction model with careful attention to time series data to avoid spurious regression of traditional econometric analysis Econometric model has been specified on the basis of theoretical arguments. This study also provides a theoretical argument that leads to formulate an empirical model from various aspects with price and non-price variables. The study is designed to identify statistically the acreage responses of Boro rice in Bangladesh. Time series data have been used in the analysis for the period 1972-73 to 2003-04. Econometric and statistical techniques are applied to estimate the supply responses of Boro rice at the national level. Long-run own price acreage elasticities for Boro is 0.95 (near to unitary elastic) respectively. Short-run own price acreage elasticities for Boro rice shows inelastic rang 0.21. Limitations and inadequate irrigation facilities at private level, distribution and availability of fertilizer in time are always problems in Bangladesh. Moreover, a main input like capital is insufficient in the short-run. These constraints helped to dampen the price elasticity of Boro rice supply in the short-run.The result suggests that farmers in Bangladesh are responsive to price incentives for Boro rice. If government promotes expanding expenditure at public and private level to build irrigation infrastructure and certified seeds it would give positive results on Boro supply in the country. Finally, if Bangladesh government follows a price stabilization policy it will reduce price risk and produce positive impact on Boro rice as well as overall crop supply situation in agriculture sector.