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

Katsushi Imai (), Nidhi Kaicker and Raghav Gaiha

Economics Discussion Paper Series from Economics, The University of Manchester

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 the 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, and 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.

JEL-codes: E31 E61 E65 (search for similar items in EconPapers)
Date: 2020-11
New Economics Papers: this item is included in nep-agr
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Working Paper: The Covid-19 Impact on Agricultural Market Arrivals and Prices in India: A Panel VAR Approach (2020) Downloads
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