Exploring Climate-driven Price Variations in Carrots: A VAR Model

Abstract

Econometric models, including Vector Autoregression (VAR), are widely used to quantify relationships among economic variables, predict outcomes, and analyze dynamic interactions over time to inform policy decisions. In this study, the objective was to understand the influence of rainfall and temperature in Nuwara Eliya on the fluctuations in prices of carrots. This study was designed to analyze the long-term impact of climatic factors on carrot price dynamics, offering insights into more informed agricultural and economic planning. Wholesale prices of carrot were collected from Hector Kobbekaduwa Agrarian Research and Training Institute (HARTI) covering twenty-three years (2000-2023). A VAR model was applied to capture the interdependencies between temperature, precipitation, and carrot prices, with an ideal lag order of 6. Granger causality tests revealed that precipitation changes significantly influenced carrot price fluctuations. VAR model coefficients further quantified the magnitude and significance of climate impacts on carrot prices.