Greener Journal of Business and Management Studies Vol. 4 (3), pp. 058-069, July 2014
Manuscript Number: 060314262
Supply Response and Corn Price Volatility in Indonesia
Riza Rahimi Bachtiar*1, Wen-I Chang2,
Ratya Anindita3 and Muslich Mustadjab4
1Master Student, University of Brawijaya and Department of Agribusiness Management, National Pingtung University of Science and Technology.
2Department of Agribusiness Management, National Pingtung University of Science and Technology, Taiwan.
3,4Department of Social Economic, Faculty of Agricultural, University of Brawijaya, Malang-Indonesia.
*Corresponding Author’s Email: rizarahimi.91 @ gmail .com, Phone: (+62) 85645071979
Corn is a strategic commodity due to its high carbohydrate and protein contain. In recent years, consumption for corn has increased because of the increasing population, high demand of corn from milling industries, livestock feed industry, and food consumption. The corn production fluctuated depending on weather, presence of pests and diseases, whereas corn consumption increases every year. Hence, the disequilibrium between production and consumption make price fluctuate. There are many undesirable effects in the increase, such as: decrease the purchase power of buyer and make financial loses. Therefore it is important to analyze price dynamics of corn. The objectives of this research are to analyze the supply response in corn market, analyze corn price volatility in Indonesia, and choose the appropriate GARCH (Generalised Autoregressive Heteroscedastic) model to express price volatility. This research located in Indonesia, because Indonesia is one of the top corn producers in the world. The methodology of this research uses GARCH model. The empirical results show that price volatility is an important risk factor.
Keywords: Supply response, price volatility, GARCH model.
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