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Development of Supply and Demand Functions of Pakistan’s Wheat Crop

93

Sd =

  • 0

    +

1Â +

2FNT +

3PPT +

4WAT

(1b)

0

-

Dd

-

0

+

Dd =

Id

=

Is

=

1 P i -

2 P w +

2 S w

1 P d +

Sd

2GDPP +

3POPP

(1c)

(1d)

(1e)

The definitions of the various variables included in the model are provided in Table-1. The aforementioned model of supply and demand is a simultaneous-equations recursive model occurs in Gujarati (2003, pp.764-766) and Maddala (2002, p.373). A number of different specifications of this model were tried, and the final estimated model was selected on the basis of economic theory and statistical/econometric diagnostics using R2, F-test, t-test, Jarque-Bera (JB) Normality Test, DW test and Durban h tests (Zulfiqar, 2008).

Data and Data Sources

The model of wheat supply and demand functions specified above includes a number of dependent and explanatory variables: these include area and lagged area under wheat crop, domestic wholesale price for wheat, quantity supplied and demanded, quantity imported and import price, world average trade price, major inputs such as nutrient-fertilizers, pesticides and water used, gross domestic product (GDP) and population.

Data on most of the listed variables were downloaded from the FAO’s website (www.fao.org; statistical databases). In addition, data were also obtained from the Government of Pakistan’s Agricultural Statistics of Pakistan, and the UN COMTRADE database. GDP-related data were obtained from the IMF website. For estimation, time series data for the period 1979/80 to 2004/05 were used.

3. Empirical Results

After trying a number of different specifications of the model specified in 1 (a-e), we ended up with the final estimated model given in Table-2. The various equations of this model are evaluated as follows.

Wheat Acreage Equation

The estimated wheat-acreage equation (A = 3695.163 + 0.48947At-1

  • +

    24.985TR) fulfills all necessary diagnostic statistics; the explanatory

variables included are in line with economic theory and are statistically

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