Asymmetric effects of rainfall on food crop prices: evidence from Rwanda

  • Received September 11, 2017;
    Accepted October 12, 2017;
    Published October 20, 2017
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  • DOI
    http://dx.doi.org/10.21511/ee.08(3-1).2017.06
  • Article Info
    Volume 8 2017, Issue #3, pp. 137-149
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This study examined the effects of the likely change in rainfall on food crop prices in Rwanda, a landlocked country where agriculture is mainly rain-fed. The empirical investigation is based on nonlinear autoregressive distributed lag cointegration framework, which incorporates an error correction mechanism and allows estimation of asymmetric long-run and short-run dynamic coefficients. The results suggest that food crop prices are vulnerable to rainfall shocks and that the effect is asymmetric in both the short and long run. Moreover, there was evidence of seasonal differences, with prices falling during harvest season and rising thereafter. Considering the ongoing threat of global climate change, and in order to cope with rainfall shortage and uncertainty, increase food affordability and ultimately ensure food security throughout the year, there is a need to develop and distribute food crop varieties and crop technologies that reduce the vulnerability of farming to rainfall shocks.

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    • Fig. 1. Monthly average nominal price of the staple crops cassava roots, beans and potatoes in Rwanda, 20002015
    • Fig. 2. Distribution of mean monthly rainfall (mm) in Rwanda, 20002012
    • Fig. 3. Dynamic multipliers. Effect of rainfall on cassava root prices
    • Fig. 4. Dynamic multipliers. Effect of rainfall on bean prices
    • Fig. 5. Dynamic multipliers. Effect of rainfall on potato prices
    • Table 1. Descriptive statistics on key variables of interest in the study (real prices are expressed in Rwandan Francs; rainfall is in millimetres)
    • Table 2. Unit root tests
    • Table 3. Dynamic asymmetries in the price of beans, potatoes and cassava roots
    • Table 4. Asymmetric statistics on rainfall effects of food prices