Price Volatility of Ornamental Plants in Batu Municipality

Abstract

The imbalance between supply and demand of ornamental plants in the market cause fluctuations that lead to price volatility. This study aimed to analyze the price volatility of ornamental plants with high economic value, such as orchids, adenium, aglaonema, anthurium, and palm. This study also analyzed the long-term and short-term relationship between the production and prices of these ornamental plants. The data used were the productions and prices of orchid, adenium, aglaonema, anthurium, and palm at the producer level from 2012 to 2020 obtained from the Agriculture Office of Batu Municipality. Volatility analysis was carried out using the ARCH/GARCH method, the long-term relationship was analyzed using the Johansen cointegration test, and the short-term relationship was carried out using the Error Correction model. The results of volatility analysis showed that all the ornamental plants studied had low price volatility. In addition, the productions and prices of the ornamental plants were cointegrated in the long run, but only the orchid had a short-term relationship with an adjustment period of 2.6 months.

Keywords

• arch/garch
• cointegration
• ecm
• ornamental plants
• price volatility