The Response of Farmer Welfares Amidst Food Prices Shock and Inflation in the Province of East Java

TL;DR

This paper examines how food price shocks and inflation affect farmer welfare in East Java, revealing that food price shocks can boost farmer exchange values while inflation reduces them, using a Bayesian VAR model.

Contribution

It applies a Bayesian VAR approach to analyze the impact of food price shocks and inflation on farmer welfare in East Java, providing new insights into their dynamic effects.

Findings

Food price shocks increase farmer exchange values.

Inflation reduces farmer exchange values.

Food price shocks raise aggregate food prices.

Abstract

Price uncertainty in food commodities can create uncertainty for farmers and potentially negatively impact the level of farmer household well-being. On the other hand, the agriculture sector in the province of East Java has greatly contributed to East Java's economy. This paper analyses the response of farmer welfare through farmer exchange values amidst fluctuation shock of food needed prices and inflation level in the east java province. The research method of this paper employs the impulse response function of the Bayesian Vector Autoregressive (BVAR) model by using time series secondary data from May 2017 until December 2023. This paper finds that the shock that happens to aggregate food prices can increase farmer exchange values even though the shock to the inflation level has reduced farmer exchange values and increased aggregate food prices.