Agricultural Economics

Agricultural Economics

Investigating the Dynamics of the Food Inflation in Iran by Using the STAR Model

Document Type : Research Paper

Authors
Mohammad Ghahremanzadeh 1
Ghader Dashti 1
Fatemeh Najari 2
Jabraeil Vahedi 2
1 Professor in Agricultural Economics, University of Tabriz
2 University of Tabriz
10.22034/iaes.2024.2006175.2002
Abstract
This study seeks to investigate the dynamics of food inflation in Iran. The STAR nonlinear model was used by quarterly data on the exchange rate, the amount of liquidity, and the agricultural sector's added value and food inflation from 1988-2020. The results show that the series are integrated at order one [I(1)] and the Johansen’s co-integration test indicates that one long-run equilibrium relationship exists between the exchange rate, liquidity, and value-added of the agricultural sector with food inflation in Iran. In other words, these variable co-moments in the long run. The Trasverta nonlinearity test was performed and the results indicate that the null hypothesis of the existence of linear can be rejected therefore a nonlinear model was carried out to analyze the dynamics of food inflation. Due to the lowest value of F statistics for the exchange rate variable, it was selected as the transfer variable which indicated the asymmetric behavior of the exchange rate. Then, the LSTAR1 model was selected as the proper model. The results of the LSTAR1 estimation model show that the variables of the two regimens have different effects on food inflation. The first regime is a declining dollar growth rate and the second regime is a rising dollar growth rate. In the first regime, inflation last season has a positive impact, and the previous two seasons significantly negatively impacted food inflation this season. But in the second regime, only the previous two seasons of food inflation had a significant impact on this season's food inflation. Liquidity growth in the last two seasons has a negative impact on food inflation if the dollar's growth rate is declining, but as the dollar's growth increases, liquidity growth in the last two seasons is food. The increase in the value added in past seasons when the dollar's growth rate has been declining, has a negative impact on food inflation.
Keywords
Food Prices
Inflation Rate
Liquidity
STAR Model

Subjects

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