THE EFFECT OF RAINFALL ON CHILI PRICE VOLATILITY IN NORTH SUMATRA: A GARCH-X APPROACH

Siti Hajar Fikraini, Imelda Elisabeth Manik, Hafidh Dzaky Ats Tsaqif, Dimas Rizki Azani, Fitri Kartiasih

Abstract


Red chili is a strategic food commodity whose prices frequently experience high fluctuations, leading to price uncertainty. This study aims to analyze the characteristics of red chili price return volatility in North Sumatra Province and to examine the effect of rainfall on this volatility using the Generalized Autoregressive Conditional Heteroskedasticity model with exogenous variables (GARCH-X). The study uses daily red chili price and rainfall data from 3 May 2022 to 30 June 2025. The estimation results indicate that red chili price volatility is dynamic and predominantly driven by short-run dynamics, while long-run volatility effects are relatively weak. In addition, rainfall does not show a statistically significant effect on red chili price volatility. These findings suggest that red chili price instability is more strongly influenced by internal market dynamics and past price shocks than by exogenous factors such as climatic conditions represented by rainfall.


Keywords


GARCH-X; price volatility; rainfall; red chili prices; returns

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References


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DOI: https://doi.org/10.20961/sepa.v23i2.113979

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