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2008-10-14 | Discussion Paper

Estimation of the aggregate agricultural supply response in Zimbabwe: The ARDL approach to cointegration

Muchapondwa, E. (2008). "Estimation of the aggregate agricultural supply response in Zimbabwe: The ARDL approach to cointegration" ERSA Working Paper No. 90 (August
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This paper uses relatively recent time series techniques on data spanning over different pricing regimes to estimate the aggregate agricultural supply response to price and non-price factors in Zimbabwe. The ARDL approach to cointegration employed here gives consistent estimates of supply response in the presence of regressor endogeneity and also permits the estimation of distinct estimates of both long-run and short-run elasticities when variables are not integrated of the same order.

The results confirm that agricultural prices in Zimbabwe are endogenous and the variables are not integrated of the same order hence use of the ARDL was worthwhile. The paper finds a long-run price elasticity of 0.18 confirming findings in the literature that aggregate agricultural supply response to price is inelastic. This result means that the agricultural price policy is rather a blunt instrument for effecting growth in aggregate agricultural supply. The provision of non-price incentives must play a key role in reviving the agricultural sector in Zimbabwe.