FORECASTING THE PRICE OF RICE

COURSE: ECO 472. 1PREPARED FOR: DR. GOUR GOBINDA GOSWAMIPREPARED BY:

SUMMAIYA BARKAT101 0008 030RAIDA UZMA101 0014 030S.M. SIFAT JAMIL101 0338 030KASEMA SADEQUE101 0154 030SIDRATUL MUNTAHA101 0937 030RAFIU IBRAHIM101 0632 020INTRODUCTIONStabilization of prices, especially of major food grains is a serious concern for a developing country like Bangladesh. Forecast the price of rice, which is the main food grain of Bangladesh for 5 years (2013-2018)OBJECTIVEDATA COLLECTION: The monthly data for coarse rice is collected from the Food Ministry from 1976 till 2012.

SOFTWARE USED: E-Views Version 7 and Microsoft Excel METHODOLOGYFORECASTING THE PRICE OF RICETEST FOR STATIONARITYAUGMENTED DICKEY-FULLER TEST

ADF t statistics < critical t values at 5% level of significanceProbability < 5%Durbin-Watson=2.007343So, the data set is stationary

CORRELOGRAM

Sharp decline in ACF denotes stationairty in data.

3 spikes of PACF denotes that this is an AR(3) model.MODELLING TRENDComparing the AIC and SIC of both Linear and Quadratic Trend:AICSICLinear Trend9.1711019.180326Quadratic Trend5.1550485.172858Since, AIC and SIC of both Quadratic trend is less than Linear trend, hence, the model is best fitted by the quadratic trend. QUADRATIC TREND

R2=77.63%This means that 77% of the model is explained by the trend.MODELLING SeasonalityR2=8.126%This means that 8.126% of the model is explained by the seasonality.

MODELLING CYCLICALITYR2=9.853%This means that 9.853% of the model is explained by the cyclicality.Applying cobweb theory: optimistic view: demandsupply=price

RESIDUAL PLOT

Majority of the residuals before 2007 are within the range. However from 2007 till 2012 the data does not exhibit white noise, because of the high price fluctuation due to irregularity. FINAL MODELThe model has a R2 value of 0.956091 which means approximately 95% of the variation in rice price is captured by the model.

The rest 5% is subjected to irregularity.

Durbin Watson=2.01

rice T T2 D1 D2 D3 D4 D5 D6 D7 D8 D9 D10 D11 D12 AR(1) AR(2) AR(3)

IRREGULAR FACTORSFORECASTED PRICE OF RICE(2013-2018)Forecasted Price201320142015201620172018M123.1323.4823.1325.0037325.5518725.11141M224.2823.2524.2825.3219625.8783626.43875M325.124.625.125.523126.0733426.63453M425.9124.425.9125.5935526.144826.7067M525.8323.625.8324.9291325.4813926.04414M624.722.9626.724.758125.3113325.87485M724.4822.9524.4132124.9545125.5070826.07276M825.2522.5124.4970725.0395825.954726.1597M924.622.1924.7428625.2865425.8425926.4083M1024.424.3124.9280125.4728426.0297826.5962M1123.625.4924.6019725.1479225.7057526.27287M1222.9624.0824.614225.1612625.7199526.28773ACTUAL AND FITTED VALUES

FINDINGS:The upward trend continues i.e. price is expected to increase.Fluctuation in price, not major in nature from 2013-2016. Fluctuation ranged within Tk. 2.00. This is because the upward surge in 2011 did not reach its normal level. In 2011 price increased from Tk.18.6 to Tk. 31.6, but reduced back to Tk. 24 only.Variation directly related to irregular components being dominant in the last six years. (2007-2009 and 2011-2012)

POLICY IMPLICATIONS in the following areas: Government interventions in the following areas: Worldwide increase in price of food grainPanic buy of governmentChange in weather conditionsChange in Indian trade policyIncreased inflationCONCLUSIONANY QUESTIONS?THANK YOU