Using the ARDL-ECM approach to investigate the nexus between support price and wheat production

Abbas Ali Chandio,Abdul Rehman,Yuansheng Jiang

doi:10.1108/jabes-10-2018-0084

Abstract

PurposeThe purpose of this paper is to examine the effect of support price on wheat production in Pakistan during the period 1971–2016.Design/methodology/approachTo capture the effect of support price on wheat production, the authors estimated the long-run linkage by using the ARDL bounds testing approach to cointegration.FindingsThis study confirmed the presence of a positive and long-term effect of area under cultivation, support price and fertilizer consumption on wheat production through ARDL bounds test. The results showed that both in the long run and short run, support price plays an important role in the enhancement of wheat production. The authors also found that the coefficients of the area under cultivation and fertilizer consumption variables were statistically significant and positive both in the long run and short run.Originality/valueThe use of the ARDL approach that examines the long-run and short-run effects of support price on wheat production in Pakistan makes the current study unique. An emerging economic literature suggests that only limited research has been conducted in this area.

Highlights

Agriculture sector has a dominant role in the economy of Pakistan and it directly supports the population of the country
The arable land of Pakistan is about 22.45m hectares, out of which 6.34m hectares land is irrigated with canal water, about 12.52m hectares land is cultivated through tube wells and other water sources, and remaining 3.59m hectares is not associated with the water (GOP, 2013)
The empirical findings of this study reveal that the autoregressive distributed lag (ARDL) model has passed all the diagnostic tests successfully

Summary

Introduction

Agriculture sector has a dominant role in the economy of Pakistan and it directly supports the population of the country. It has about 26 percent contribution to the economic GDP. The Government of Pakistan is still paying attention to improve different varieties of wheat by providing the agricultural credit support to boost the production (Chandio and Jiang, 2018; Rehman et al, 2017a, b; Rehman, Jingdong, Kabir and Hussain, 2017). Previous research on wheat crop in Pakistan has shown that the farmers are deliberate to introduce new varieties to

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