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The Covid-19 Impact on Agricultural Market Arrivals and Prices in India: A Panel VAR Approach

Author

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  • Katsushi S. Imai

    (Department of Economics, The University of Manchester, UK and Research Institute for Economics and Business Administration, Kobe University, JAPAN)

  • Nidhi Kaicker

    (School of Business, Public Policy and Social Entrepreneurship, Ambedkar University, INDIA)

  • Raghav Gaiha

    (Glovbal Development Institute, University of Manchester, UK and Population Studies Centre, University of Pennsylvania, U.S.A.)

Abstract

Using the panel data on market arrivals and prices for the 17 Indian states from July 2019 to June 2020, the present study examines whether the growth of Covid-19 pandemic influenced fractional changes in market arrivals and prices. A point of departure of our analysis from the literature is that we take into account the dynamic and lagged interactions between the fractional changes in market arrivals and prices of food commodities, namely, rice, onion, potato, and tomato, and the growth rate in the severity ratio of the Covid-19 pandemic, using a panel VAR model based on GMM. Our results suggest that there was virtually no effect of the Covid-19 pandemic growth on fractional changes in market arrivals while the former negatively influences fractional food price changes in the short run. However, once we consider feedback effects in the VAR model based on Impulse Response Functions, the overall elasticity of the fractional change in the market arrival with respect to the Covid-19 pandemic growth turns from weakly positive to zero in a relatively short term. The overall elasticity of the fractional change in the market price with respect to the Covid-19 pandemic growth turns from positive to zero or negative in onion and tomato, from negative to zero in rice and potato. We also find a great deal of regional heterogeneity where, for instance, the negative effect of the pandemic growth on the fractional change in price is larger in Maharashtra, the state with the worst pandemic. While the effect of the pandemic growth is relatively short-lived, policymakers need to take into account dynamic effects over time given the complexity of the transmission mechanism.

Suggested Citation

  • Katsushi S. Imai & Nidhi Kaicker & Raghav Gaiha, 2020. "The Covid-19 Impact on Agricultural Market Arrivals and Prices in India: A Panel VAR Approach," Discussion Paper Series DP2020-30, Research Institute for Economics & Business Administration, Kobe University, revised Dec 2020.
    • Handle: RePEc:kob:dpaper:dp2020-30
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    References listed on IDEAS

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    1. William G. Tomek & Robert J. Myers, 1993. "Empirical Analysis of Agricultural Commodity Prices: A Viewpoint," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 15(1), pages 181-202.
    2. Kanika Mahajan & Shekhar Tomar, 2020. "Here Today, Gone Tomorrow: COVID-19 and Supply Chain Disruptions," Working Papers 28, Ashoka University, Department of Economics.
    3. Michael R. M. Abrigo & Inessa Love, 2016. "Estimation of panel vector autoregression in Stata," Stata Journal, StataCorp LP, vol. 16(3), pages 778-804, September.
    4. Deepak Varshney & Devesh Roy & J. V. Meenakshi, 2023. "Impact of COVID-19 on Agricultural Markets: Assessing the Roles of Commodity Characteristics, Disease Caseload, and Market Reforms," India Studies in Business and Economics, in: Indrani Gupta & Mausumi Das (ed.), Contextualizing the COVID Pandemic in India, chapter 0, pages 249-271, Springer.
    5. Jody Harris & Lutz Depenbusch & Arshad Ahmad Pal & Ramakrishnan Madhavan Nair & Srinivasan Ramasamy, 2020. "Food system disruption: initial livelihood and dietary effects of COVID-19 on vegetable producers in India," Food Security: The Science, Sociology and Economics of Food Production and Access to Food, Springer;The International Society for Plant Pathology, vol. 12(4), pages 841-851, August.
    6. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
    7. Tomek, William G. & Myers, Robert J., 1993. "Empirical Analysis Of Agricultural Commodity Prices: A Viewpoint," Working Papers 6847, Cornell University, Department of Applied Economics and Management.
    8. Reardon, Thomas & Bellemare, Marc F. & Zilberman, David, 2020. "How COVID-19 may disrupt food supply chains in developing countries," IFPRI book chapters, in: COVID-19 and global food security, chapter 17, pages 78-80, International Food Policy Research Institute (IFPRI).
    9. Michael R.M. Abrigo & Inessa Love, 2016. "Estimation of Panel Vector Autoregression in Stata: a Package of Programs," Working Papers 201602, University of Hawaii at Manoa, Department of Economics.
    10. Katsushi S. Imai & Nidhi Kaicker & Raghav Gaiha, 2021. "Severity of the COVID‐19 pandemic in India," Review of Development Economics, Wiley Blackwell, vol. 25(2), pages 517-546, May.
    11. Katsushi S. Imai & Nidhi Kaicker & Raghav Gaiha, 2020. "The Covid-19 Impact on Agricultural Prices in India," Discussion Paper Series DP2020-25, Research Institute for Economics & Business Administration, Kobe University, revised Dec 2020.
    12. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
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    Cited by:

    1. Goswami, Binoy & Mandal, Raju & Nath, Hiranya K., 2021. "Covid-19 pandemic and economic performances of the states in India," Economic Analysis and Policy, Elsevier, vol. 69(C), pages 461-479.

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    More about this item

    Keywords

    Covid-19 pandemic; Food prices; A panel VAR model; Lockdown; INDIA;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes

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