Analysis of Flue-cured Tobacco Supply Elasticity in Zimbabwe 1980-2010: An Error Correction Model Approach
Flue cured tobacco has been an important crop for the Zimbabwean economy historically in terms of foreign currency earnings and employment creation. Between 1980 and 2000, there is a general increase in tobacco output, followed by a sharp decline from 2001 up to 2008 and then output starts to increase again. Flue cured tobacco output as measured by the quantity that is delivered to the auction floors is used to estimate supply elasticity. The objective is to determine if flue-cured tobacco supply is price elastic and whether price incentives alone will boost supply in the short -run. Time series data on flue cured tobacco output, prices, production costs, prices of major competing crops, the exchange rates and inflation are analysed to model the price elasticity of flue cured tobacco between 1980 and 2010. The Augmented Dickey –Fuller unit root test is performed to test the variables for stationarity. The data generating processes show these data series to be non-stationary and therefore OLS estimations would be biased. The data series are differenced and the Engel-Granger procedure is performed to test for cointegration. The Error Correction Model approach is used to estimate flue cured tobacco supply. Flue cured tobacco supply is found to be price inelastic in the short –run.
|Date of creation:||2011|
|Contact details of provider:|| Postal: AARES Central Office Manager, Crawford School of Public Policy, ANU, Canberra ACT 0200|
Phone: 0409 032 338
Web page: http://www.aares.info/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:ags:aare11:100696. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.