| Abstract [eng] |
The goal of this paper is to analyze factors that affect price risk in the European Union agriculture markets. This paper chooses to analyze price volatility, as it is assumed to be the best measurement of the price risk. To achieve this goal, an ARCH-GARCH Bayesian model with different control variables has been constructed and tested on the prices of maize, barley, wheat, and rape. Four hypotheses have been created concerning subsidies, levels of reserves, input costs, and specialization. The underlying results demonstrate that there exists a relationship between price risk and government’s subsidies as well as input cost. Government’s subsidies tend to increase the volatility by around one euro. Input costs have a smaller effect: a ten percent increase in input costs tends to increase price volatility by around one percent. This, however, has been only observed in rape and wheat prices when considering energy costs as well as maize prices when considering seed costs. Other factors like specialization and reserves seem to have no impact on price volatility. It is thought that it has been caused by poor data availability. Other trends concerning price means have also been noticed. One worth mentioning is the large effect of weather on price levels. However, this factor has not had significant influence on price volatility. From the gathered results, overall recommendations have been proposed to the European Union. First, if the member states wish to curb price risk, direct subsidies should be avoided. Second, stable price levels are a very important factor when decreasing crop risk and should be kept up as much as possible. In general, the paper has demonstrated some innovative solutions in dealing with short datasets that more often than not plague crop price models by using Bayesian statistics and provided a solid footing for further research in this field. |
