Price Volatility Analysis in Indonesian Beef Market
Abstract
The Indonesian beef price movement increasing erratically and tends to be volatile in recent years. Based on the price monitoring in several production centers, there are beef price fluctuations in the consumer level across time and between provinces. This study tries to present the relationship between the beef price volatility and Indonesia’s efforts to ensure food security through self-sufficiency in beef. We consider a series of consumer daily beef price from January 2006 to December 2013, with total T=2086 observations to understand beef price volatility in Indonesia, and to analyze the impact of beef self-sufficiency program to the beef price volatility in Indonesia. Data was obtained from Ministry of Trade, Government of Indonesia and it was collected through market survey from three different markets in 33 capital provinces in Indonesia. The methodology follows GARCH model to measure the beef price volatility. The GARCH (1.1) model gives information that beef price movements are influenced by the volatility from the previous period and yesterday’s variance. The volatility of beef price was driven more by its own variance rather than external shocks. GARCH (1.1) model shows that the beef price volatility will tend to be smaller and persistence in the future. Parameter of the third dummy variable in the variance equation to capture the change policy is statistically significant. It indicates that the beef self-sufficiency program may lower the beef price volatility.
Keywords: beef price, garch model, price volatility, self sufficiency
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