The Effect of Price Policy on Price Dynamics: Empirical Evidence in Indonesian Rice Market at Wholesale Level

Bayu Krisnamurthi, Anisa Dwi Utami

Abstract


As a major share expenditure for the poor, rice is attributed as a strategic food commodity in the Indonesian economy. For many decades, the Indonesian rice market has been intervened by the price regulation. The Indonesian government had set two types of rice price policies of 2016 and 2017 with the argument of price stabilization during the last five years. This study aimed to investigate the effect of price policies of 2016 and 2017 on the domestic price dynamics in the Indonesian rice market. This study used daily price series taken from the Cipinang Wholesale Rice Market in Jakarta within the period of October 1st, 2014, until February 12th, 2018 covering 10 rice varieties. The role of price policy on the price dynamics was evaluated by using a multivariate error correction model (MVECM). The empirical findings confirmed that generally, these price policies had different effects on the price dynamics which proposed different reactions from the different rice varieties both in magnitude and signs. The variations were also found regarding the short-run and long-run behavior. Generally, the findings suggested a relatively small elasticity of the policy on the prices.


Keywords


Indonesia; price dynamics; price policy; rice; VECM

Full Text:

PDF

References


Anderson, K. (2012). Government Trade Restrictions and International Price Volatility. Global Food Security, 1(2), 157–166. https://doi.org/10.1016/j.gfs.2012.11.005

Barrett, C. B. (Ed.). (2013). Food Security and Sociopolitical Stability. Oxford: Oxford University Press. https://doi.org/10.1093/acprof:oso/9780199679362.001.0001

Berger, J., Dalheimer, B., & Brümmer, B. (2021). Effects of Variable EU Import Levies on Corn Price Volatility. Food Policy, 102. https://doi.org/10.1016/j.foodpol.2021.102063

Bourgeois, R., & Kusumaningrum, D. (2008). What Cereals Will Indonesia Still Import In 2020? Bulletin of Indonesian Economic Studies, 44(2), 289–312. https://doi.org/10.1080/00074910802169038

Ceballos, F., Hernandez, M. A., Minot, N., & Robles, M. (2017). Grain Price and Volatility Transmission from International to Domestic Markets in Developing Countries. World Development, 94, 305–320. https://doi.org/10.1016/j.worlddev.2017.01.015

Dalheimer, B., Herwartz, H., & Lange, A. (2021). The Threat of Oil Market Turmoils to Food Price Stability in Sub-Saharan Africa. Energy Economics, 93. https://doi.org/10.1016/j.eneco.2020.105029

Dawe, D. (2008). Can Indonesia Trust The World Rice Market? Bulletin of Indonesian Economic Studies, 44(1), 115–132. https://doi.org/10.1080/00074910802008053

Dawe, D., & Timmer, C. P. (2012). Why Stable Food Prices are A Good Thing: Lessons from Stabilizing Rice Prices in Asia. Global Food Security, 1(2), 127–133. https://doi.org/10.1016/j.gfs.2012.09.001

Dorosh, P. A. (2008). Food Price Stabilisation and Food Security: International Experience. Bulletin of Indonesian Economic Studies, 44(1), 93–114. https://doi.org/10.1080/00074910802001603

Galtier, F. (2013). Managing Food Price Instability: Critical Assessment of The Dominant Doctrine. Global Food Security, 2(2), 72–81. https://doi.org/10.1016/j.gfs.2013.02.001

Gardebroek, C., Hernandez, M. A., & Robles, M. (2016). Market Interdependence and Volatility Transmission among Major Crops. Agricultural Economics, 47(2), 141–155. https://doi.org/10.1111/agec.12184

Gilbert, C. L. (2012). International Agreements to Manage Food Price Volatility. Global Food Security, 1(2), 134–142. https://doi.org/10.1016/j.gfs.2012.10.001

Grabowski, R., & Self, S. (2016). Staple Food Price Instability and Structural Change: Indonesian Experience. Journal of Asian Economics, 47, 35–44. https://doi.org/10.1016/j.asieco.2016.10.001

Herwartz, H., & Saucedo, A. (2020). Food–oil Volatility Spillovers and The Impact of Distinct Biofuel Policies on Price Uncertainties on Feedstock Markets. Agricultural Economics, 51(3), 387–402. https://doi.org/10.1111/agec.12561

Hoang, H. K., & Meyers, W. H. (2015). Price Stabilization and Impacts of Trade Liberalization in the Southeast Asian Rice Market. Food Policy, 57, 26–39. https://doi.org/10.1016/j.foodpol.2015.07.009

Honfoga, B. G., N’tandou-Bonzitou, G., Vodouhè, R. S., Bellon, M. R., & Hounhouigan, J. D. (2018). Assessing the Role of Market Integration in The Consumption of Traditional Foods in Benin: A Joint Price Instability Coefficient and Diet Composition Approach. Agricultural and Food Economics, 6, 2. https://doi.org/10.1186/s40100-018-0097-1

Maclean, J. L., Dawe, D. C., Hardy, B., & Hettel, G. P. (Eds.). (2013). Rice Almanac: Source Book for The Most Important Economic Activities on Earth (Fourth Ed.). Wallingford: CABI Publishing.

Naylor, R. L. (Ed.). (2014). The Evolving Sphere of Food Security. Oxford: Oxford University Press. https://doi.org/10.1093/acprof:oso/9780199354054.001.0001

Nuryanti, S., Hakim, D. B., Siregar, H., & Sawit, M. H. (2017). Political Economic Analysis of Indonesian Rice Market. J. ISSAAS (Internasional Society for Southeast Asian Agricultural Sciences), 23(2), 158–168.

Pieters, H., & Swinnen, J. (2016). Trading-off Volatility and Distortions? Food Policy During Price Spikes. Food Policy, 61, 27–39. https://doi.org/10.1016/j.foodpol.2016.01.004

Pinstrup-Andersen, P. (Ed.). (2014). Food Price Policy in an Era of Market Instability: A Political Economy Analysis. Oxford: Oxford University Press. https://doi.org/10.1093/acprof:oso/9780198718574.001.0001

Rachmat, R., Thahir, R., & Gummert, M. (2006). The Empirical Relationship Between Price and Quality of Rice at Market Level in West Java. Indonesian Journal of Agricultural Science, 7(1), 27–33. https://doi.org/10.21082/ijas.v7n1.2006.p27-33

Simatupang, P., & Timmer, C. P. (2008). Indonesian Rice Production: Policies and Realities. Bulletin of Indonesian Economic Studies, 44(1), 65–80. https://doi.org/10.1080/00074910802001587

Timmer, C. P. (2002). Agriculture and economic development. In Handbook of Agricultural Economics (Vol. 2A, pp. 1487–1546). Amsterdam. https://doi.org/10.1016/S1574-0072(02)10011-9

Timmer, C. P. (2017). Food Security, Structural Transformation, Markets and Government Policy. Asia & the Pacific Policy Studies, 4(1), 4–19. https://doi.org/10.1002/app5.161

Tschirley, D. L., & Jayne, T. S. (2010). Exploring the Logic Behind Southern Africa’s Food Crises. World Development, 38(1), 76–87. https://doi.org/10.1016/j.worlddev.2009.09.008

Warr, P., & Yusuf, A. A. (2013). World Food Prices and Poverty in Indonesia. Australian Journal of Agricultural and Resource Economics, 58(1), 1–21. https://doi.org/10.1111/1467-8489.12015




DOI: https://doi.org/10.18196/agraris.v8i1.11546

Refbacks

  • There are currently no refbacks.


Creative Commons License
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Indexed By:

     

Office Address:
Department of Agribusiness, Faculty of Agriculture, Universitas Muhammadiyah Yogyakarta

Ground Floor of F3 Building (Siti Walidah)
Jl. Brawijaya, Tamantiro, Kasihan, Bantul. 55183
Telp.: +62 274 387656, Ext.: 201
HP or WhatsApp: +62 85328737828
Email: agraris@umy.ac.id

AGRARIS is licensed under a Creative Commons Attribution-ShareAlike 4.0  (CC BY-SA 4.0) International License.