prefix: doi.org/10.52283/1.ajbmr |
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A DYNAMICS ANALYSIS OF THE DETERMINANTS OF FOOD PRICE IN IRAN
►Abdorahim Ira
10.52283/NSWRCA.AJBMR.20150504A04
ABSTRACT
In this study, main determinants of food inflation in Iran over the period 2002-2015 are investigated and the interaction between this factors and food price impulse response will be analyzed by using Vector Error Correction (VEC) Model. Augmented Dickey-Fuller with lag length on Schwarz Info Criterion and Phillips-Perron with Newey West Bandwidth used to test the stationarity of the data. Johansen-Juselius system co-integration test applied to find the stationary linear combination of the non-stationary variables. The Long run relationship between dependent and independent variables estimated on Vector Error Correction (VEC) model. The results show that there is a relationship within the dependent variable and its independent variables. On the long run, the oil price, money supply and exchange rate are significantly positively related to the food price in Iran. Motivation of the study is to understand driving factors behind the food inflation phenomenon during the high inflation period that followed the subsidies reform plan in December 2010 and 2011 oil shock. The results presented in this paper indicate that oil price and money supply are main determinants of food inflation in Iran. The findings have important implications for understanding the volatility of food price in Iran and able to conclude the effectiveness of the monetary policy.
Keywords: food prices, inflation, co-integration, oil pricePages:36-43 :: Download-View
