Co-integration approach for energy-use in agriculture
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Date
2014
Authors
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Journal ISSN
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Publisher
Indian Agricultural Statistics Research Institute Indian Agricultural Research Institute New DelhI
Abstract
In view of increasing share of energy in the cost of cultivation as well as deregulation of
prices of some petroleum products, agricultural commodity prices are vulnerable to the
rise in energy prices, particularly of crude oil. In this study an attempt has been made to
examine the co-movement between energy and agricultural commodity prices with the
help of Johansen cointegration technique using monthly wholesale price indices for the
period April 1994 to March 2014. Since the process of deregulation started from April
2002 onward, the entire period was divided in two equal parts, so that before and after
period analysis will provide a clear picture of a potential link between prices. The results
clearly revealed that energy and selected agricultural commodity prices are integrated in
the long-run since 2004 while fruits prices were integrated even before deregulation of
petroleum price. This means that there is an increasing tendency for price changes in
selected agricultural commodities corresponding to changes in international crude oil
prices in recent years. Further an effort was also made to examine energy growth linkage
in major states of India with the help of panel cointegration using annual time series data
of real GSDP from agriculture and allied sectors and corresponding electricity
consumption for agriculture during 1990-2010. The empirical analysis fully supported a
positive long-run cointegrated relationship between GSDP and electricity consumption
when the heterogeneous state effect was taken into account. It was observed that
although agricultural growth and energy consumption lack short-run causality, there is
long-run unidirectional causality running from energy consumption to agricultural
growth. This implies that reducing energy consumption does not adversely affect
agricultural growth in the short-run but would in the long-run, thus energy demand will
increase in future in order to achieve higher agricultural growth.
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Description
T-9109
Keywords
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