The impact of economic policy uncertainty on agricultural prices: Evidence from China

Abstract

This study aims to analyze the fluctuations in agriculture and their effects on the economy. According to the traditional supply and demand theory, prices are determined by the relationship between supply and demand. When demand exceeds supply, agricultural product prices rise, increasing consumers’ cost of living. It potentially causes panic among public and endangers social stability. Conversely, when supply exceeds demand, farmers are forced to lower prices to promote sales, which jeopardizes their income. It may pose threat to consumers’ food safety. Therefore, the stable development of agriculture is of paramount importance in maintaining the country’s economic and social stability. This study examines the transmission mechanism and time-varying impact of economic policy uncertainty on the price volatility of different kinds of agricultural products, using the TVP-VAR model, based on the economic policy uncertainty index and agricultural product price data.