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Analyzing volatility of rice price in Indonesia using ARCH/GARCH model

Author

Listed:
  • Ahmad Muslim

    (Faculty of Economics, University of Al Azhar Indonesia, Jakarta, Indonesia.)

Abstract

This research aims to to analyze and to study the implication of the volatility of deflated retail price of rice in out of Java which are represented by three markets in Indonesia, namely Medan, Makassar, and Banjarmasin. The period of observation is from January 1984 to August 2011. The better model in this study is Generalized Autoregressive Conditional Heteroskedasticity (GARCH). The result of the study shows that the change of rice price in all three markets was caused mainly by seasons and yearly routine cycles. In addition, at the reformation era and at economic crisis, the rice prices were more volatile.

Suggested Citation

  • Ahmad Muslim, 2014. "Analyzing volatility of rice price in Indonesia using ARCH/GARCH model," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 6(1), pages 1-12, April.
    • Handle: RePEc:uii:journl:v:6:y:2014:i:1:p:1-12
    DOI: http://dx.doi.org/10.20885/ejem.vol
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    References listed on IDEAS

    as
    1. Teguh Dartanto, 2010. "Volatility of World Rice Prices, Import Tariffs and Poverty in Indonesia : A CGE-Microsimulation Analysis," Economics and Finance in Indonesia, Faculty of Economics and Business, University of Indonesia, vol. 58, pages 335-364, December.
    2. Francis X. Diebold, 2004. "The Nobel Memorial Prize for Robert F. Engle," Scandinavian Journal of Economics, Wiley Blackwell, vol. 106(2), pages 165-185, June.
    3. Matei, Marius, 2009. "Assessing Volatility Forecasting Models: Why GARCH Models Take the Lead," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 42-65, December.
    4. C S C Sekhar, 2007. "Volatality of Agricultural Prices – An Analysis of Major International and Domestic Markets," Working Papers id:1188, eSocialSciences.
    5. Dima Alberg & Haim Shalit & Rami Yosef, 2008. "Estimating stock market volatility using asymmetric GARCH models," Applied Financial Economics, Taylor & Francis Journals, vol. 18(15), pages 1201-1208.
    6. Bera, Anil K & Higgins, Matthew L, 1993. "ARCH Models: Properties, Estimation and Testing," Journal of Economic Surveys, Wiley Blackwell, vol. 7(4), pages 305-366, December.
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    More about this item

    Keywords

    volatility; retail; GARCH; reformation; crisis;
    All these keywords.

    JEL classification:

    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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