An economic analysis of temporal price instability and supply response in arecanut

Abstract

The present study is partly a methodological attempt where a non-parametric regression frame was used to analyze the time series dataon arecanut. Sudden changelshift points were observed in price, area and production data of arecanut by fitting kemel weighed IMBl linear regression with dummy variables for shift. The data has been classified into different periods based on the shift points. The differential growth rates and trends in various periods are substantiated based on available literame- obselvations and assumptions. Three shift points (four periods) were observed in price data two shift points (three periods) in area and one shift point (two periods) in production and productivity. Although the prices were stable after the drastic fall in 1972-73, from mid-eightyies onwards, frequent price fluctuations were observed. Commercialization of arecanut trade made the marketing system highly complicated and conducive for the trade manipulations. The price instability revealed in the irregular time series component proved the poor market intelligence in arecanut trade.