Examining the Evolution of Agricultural Production of Three SAARC Countries: Bangladesh, India, and Pakistan

This chapter examines the issue of trends, cycles, and irregular components in the per capita agricultural production of three countries—Bangladesh, India and Pakistan—which are members of the South Asian Association for Regional Cooperation (SAARC). SAARC countries constitute about 23 % of the world population, and have 15 % of the world’s arable land. The selection of the aforementioned countries is based on their agricultural economic importance to the region, as they possess about 80 % of the agricultural economy. This chapter uses the unobserved components model to decompose the per capita agricultural production of each country, and investigates the relationship of each component among these countries. The time period for the study is 1961–2010, and the FAO’s statistical dataset is used. The smooth trend plus stochastic cycle methodology of Koopman et al. (2009) is used to estimate the model by maximum likelihood. Primarily, the residual diagnostics will validate the model with good fit. Diagnostics of normality, auxiliary, prediction, and forecast also show that there is no deficiency in the model. Empirical results clearly demonstrated that India is positively correlated with Bangladesh in irregular components, but moderately correlated with Pakistan in growth. Finally, there is an evidence of a stronger correlation between the three countries in short cycles than in long cycles.