Price Volatility Analysis of Red and Cayenne Pepper of Java Islands during Covid-19 Pandemic

Red Chilli, Cayenne Pepper, Volatility, Covid-19 Pandemic, ARCH/GARCH

Authors

  • Maria Nina Egyna Brahmana
    mariabrahmana@apps.ipb.ac.id
    Department of Resource and Environmental Economics, Faculty of Economics and Management, IPB University.
  • Sahara Department of Economics, Faculty of Economics and Management, IPB University.
  • Nia Kurniawati Hidayat Department of Resource and Environmental Economics, Faculty of Economics and Management, IPB University.
September 28, 2022

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One of the food crops that is considered an essential commodity in Indonesia and has economic value is chilli. Chilli consumption continues to increase, especially red chilli and cayenne pepper, but since the Covid-19 Pandemic, consumption has decreased. Red chilli and cayenne pepper are commodities whose production is seasonal, easily damaged, and uneven throughout Indonesia. The Covid-19 pandemic in Indonesia was first on the island of Java, which shook the supply of agricultural products and caused colossal price fluctuations in the market. Since the implementation of large-scale restrictions in Indonesia, it has caused a hampering of product distribution between regions. Fluctuations in the price of red chili and cayenne pepper often impact the high contribution of chilli to inflation. Therefore, this study aims to analyze the price volatility of red chili on Java Island and the price volatility of cayenne pepper on Java Island. The analysis method used is ARCH GARCH modelling to measure volatility. The results showed that the volatility of red chilli on Java Island is high. In contrast, the volatility of cayenne pepper on Java Island is low.