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Comments on Potato for Rice: A Preamble
Posted by  Mashfiqur Rahman Khan, Dhaka University

First of all, hats off to Anik to initiate the whole proceedings with a nice economic research paper. While reading the paper I was wondering few things. Although it is well acknowledged that a simple econometric methodology is adopted in the study, however, I feel some concern with this methodology as the discussion is largely driven by the regression results. Firstly, as the dependent variable is in real term, the explanatory variables need to be converted into real ones using CPI. Secondly, consumption is a function of permanent income and HH total expenditure rather than its total income is regarded as its permanent income. Additionally, the measurement of expenditure is far more accurate than that of income. Thirdly, in cross sectional regression including the price variable will raise some question as raised by Farida apa. And inclusion of two correlated price variables will every likely cause some multi-collinearity problem. If you see the seasonality of the price of rice and potato, clearly demand for potato has a strong seasonal component built into it, whereas demand for rice is more stable over time. So, the sample period chosen has got some implication on the demand for potato. One way to get out of this problem seems to me is estimating the demand for rice. Now, having done all the exercise the bottom line is that the potato price needs to be stabilized throughout the year to ensure food security. However, it is uncertain that stabilization of potato price will do the job as the cross elasticity is not very high in magnitude in the backdrop of low current level of consumption of potato. One way to strengthen this policy option is by getting a large cross elasticity of calorie substitution.