Assessing the production vs. price relationship of black tea in Sri Lanka: an application of Koyck’s geometric-lag model

The potential relationship between production and prices of black tea in Sri Lanka was examined using time-series data (1991–2011) in Koyck’s Geometric-lag models specified for three main elevations (High, Mid, and Low-grown). The results show that prices fetched at the Colombo auction impose a significant impact on production levels, and the time taken for an increase in price to have a complete effect on production was an average lag period of two and half months. Further, it shows that the actual and predicted levels of production were almost similar in most of the months during this period proving the validity and reliability of model.