The Shock Effect Study on the Impact of Financial Policies and Fiscal Expenditures on the Agricultural Products’ Prices in China

Wen YI

Abstract


According to the monthly data of agricultural products’ prices index from 1999 to 2012 and the related information about financial policies in China, the time series analysis methods has been made use and also I built a vector auto regression (VAR) model and vector error correction model (VECM) to finish the empirical analysis of impact factors on agricultural products .It is shown that money supply shock has a statistically significant impact on China’s agricultural products’ prices. The results indicate that: (a) In the long term, the growth of M0 will lead the fluctuations in the prices of agricultural products, while in the short term ,the supply of M2 and M1would play an important role. (b) In the long run, the prices of agricultural products in China have been subject to the level of fiscal expenditures and the exchange rate. But in the short term, the impact of the exchange rate is not significant. (c) By using Granger causality test method, the relationship between broad money supply (M2) and agricultural products’ prices is bidirectional. At last of the paper, some policy recommendations have been put forwards.


Keywords


Fluctuations of agricultural products’ prices; Financial policies; Granger causality test; VAR model

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References


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Benavides, G. (2004). Price volatility forecasts for agricultural commodities: An application of historical volatility models, option implied and composite approaches for futures prices of corn and wheat. Central Bank of Mexico.

Cheng, G. Q., & Hu, B. C. (2008). Impact analysis of a new round of agricultural prices. 8(1).

Fang, H. L. (2009). The impact of RMB appreciation on the prices of agricultural products. Issues in Agricultural Economy, (7).

Hu, B. C. (2010). CPI, prices of agricultural products and monetary policy-based on empirical data from 2001 to 2009. Chinese Rural Economy, (12).

Kwon, D. H., & Koo, W. W. (2009). Interdependence of Macro and agricultural economics: How Sensitive is the Relationship. American Journal of Agricultural Economics, 91(5), 1194-1200.

Li, G. X. (2008). Global agricultural prices and its impact on China’s agricultural prices. Agricultural Outlook, (7).

Liu, Y. Z. (2010). Exchange rate pass-through effect on Chinese agricultural prices. Chinese Rural Economy, (1).

Mishkin (2009). Monetary and financial studies. China: Tsinghua University Press.

Mitra, S. (2008). A nonlinear cobweb model of agricultural commodity price fluctuations. Department of Economics, Fordham University.

Research Group. (2010). Agricultural price volatility, market regulation and mechanism analysis. Agricultural Technology, (10).

Rosen, S. (2008). Rising food prices intensify food insecurity in developing countries. USDA-ERS.

Saghaian, S. H., Michael, R. R., & Marchant, M. A. (2002). Monetary impacts and overshooting of agricultural prices in an open economy. American Journal of Agricultural Economics, 2, 90-103.

Shui, S. N. (2008). The new trend of world agricultural price volatility: Motives and trend. Issues in Agricultural Economy, (6).

Valenzuela, E., Hertel, T. W., Keeney, R., & Jeffrey, R. (2007). Assessing global computable general equilibrium model validity using agricultural price volatility. American Journal of Agricultural Economics, 89(2), 383-397.

Zhong, F. N. (2008). How to treat the current international food rising prices. Shanghai Jiaotong University 90 Anniversary Report.




DOI: http://dx.doi.org/10.3968/%25x

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