TITLE:
Do the Indian Agricultural Commodities’ Prices Exhibit Non-Linear Mean Reversion? An Empirical Evidence
AUTHORS:
Aviral Kumar Tiwari, Mothkuri Aruna, Aruna Kumar Dash
KEYWORDS:
Non-Linearity, Mean-Reversion, Prices of Agricultural Commodities, Inflation
JOURNAL NAME:
Theoretical Economics Letters,
Vol.5 No.2,
April
28,
2015
ABSTRACT: Indian economy’s inflation index often reflects
double digit tendencies due to supply side shortages caused by droughts, rise
in the prices of crude oil in the international markets etc. These factors may
be responsible for non-linear behaviour of inflation index. Against this
backdrop, an attempt is made in this study to capture non-linear mean reversion
of prices of 47 agricultural commodities of India. The study employs powerful
non-linear unit root test so as to generate robust findings to infer valid
policy implications. The results of the study indicate the presence of unit
root with drift process for Food Grains, Cereals, Pulses, Fruits, Vegetables,
Primary Articles, Ragi and Rice. And for rest of the commodities, it is
observed that there is evidence of mean reversion and therefore, the impact
would be only temporary in nature. Thus, the empirical inferences enable the
policy makers to design appropriate short term and long term polices related to
the prices of agricultural commodities.