The impact of el nino southern oscillation and covid-19 on the rice price dynamics in Indonesia: The vector error correction model approach

Abstract

Half of the world's population makes rice a crop of focus because it has many opportunities in the future. However, there are disruptors for rice development in 2020, which are climate variability and COVID-19 Pandemics. El Nino-Southern Oscillation (ENSO) is a climate variability that can threaten the rice price dynamics. Besides that, COVID-19 also has implications for rice price dynamics. The objectives of this paper are: (1) to empirically study the impact of the El Nino-Southern Oscillation on rice price dynamics and (2) to analyze the effect of COVID-19 pandemics on rice price in Indonesia. The study utilized the vector error correction model (VECM) estimation method and the variables used were sea surface temperature (SST), COVID-19 daily cases, rice price, rice production, and rice price regulation. The result is that El Nino has a positive effect on rice prices, which can increase the price level. The opposite is true also for a La Nina shock. COVID-19 also has a positive impact on the daily cost of rice. The results of this study ought to be of interest to rice producers in Indonesia, as well as processors and intermediaries in the rice markets.