Terms of Trade and Supply Response of Indian Agriculture: Analysis in Cointegration Framework

Surajit Deb
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Surajit Deb: Ram Lal Anand College (Evening), University of Delhi, Benite Zuarez Road, New Delhi 110021, India

Indian Economic Review, 2005, vol. 40, issue 1, 65-92

Abstract: This paper examines the presence of stochastic trend in various domestic terms of trade (TOT) series in India. Results suggest that underlying data generating processes of TOT are non-stationary. Subsequently, we investigate the presence of long-run relationship(s) in the agricultural supply response model through cointegration analysis. The error correction estimates suggest that short-run output adjustments in agriculture are not related to TOT changes in a causal manner. However, short-run deviations in TOT create error-correction in the long-term output adjustments through changes in technology (irrigation). This may imply that agricultural growth can respond better if price incentives are combined with investments in irrigation.

Keywords: Domestic terms of trade; Agricultural supply response; Unit root; Cointegration (search for similar items in EconPapers)
JEL-codes: C22 C32 Q11 (search for similar items in EconPapers)
Date: 2005
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