Abstract:
The objective of this study is using the Markov Switching Vector Autoregressive method and regime dependent impulse response functions to measure the pass-through of world food prices to consumer price index in Iran from 1990 to 2013. With respect to information criteria and the log-likelihood ratio statistic, MSIA(2)-VAR(1) model has a better fit to data than other models. The magnitude of the pass-through in first and second regimes is respectively 0.43 and 0.94 after two years. We show that the magnitude of the pass-through from world food prices to consumer price index resulting from recent world food price shocks has been higher than before.
Machine summary:
Pass-Through Effects of Global Food Prices on Consumer Prices in Iran Ebrahim Javdan*1, Jafar Haghighat2, Esmaeil Pishbahar3, Phillip Kostov4, Rassul Mohammadrezaei5 Received: 2016/09/17 Accepted: 2016/11/13 Abstract The objective of this study is using the Markov Switching Vector Autoregressive method and regime dependent impulse response functions to measure the pass-through of world food prices to consumer price index in Iran from 1990 to 2013.
170/ Pass-Through Effects of Global Food Prices on Consumer … food commodities as biofuel input, rising energy prices, larger meat consumption in emerging countries, exchange rate volatilities and low stock level expectations are the reasons historically as has been revealed in the literature (Yang et al.
Jongwanich & Park (2011) concluded that the magnitude of the pass-through has been limited from global food and oil price shocks to inflation in developing Asian countries, and government policies such as subsidies and price controls have played a role in reducing or delaying the pass-through effect.
In this paper, MS-VAR model is used to estimate the world food price pass-through to consumer prices in Iran.
After the estimation of MS-VAR model, regime dependent impulse response functions are used to calculate the magnitude of the world food prices pass-through into domestic prices in Iran.
Impulse response functions were used in order to interpret the passing through of world food price shock to consumer price index in Iran.
We show that the magnitude of the pass-through from world food prices to the consumer price index in the first and second inflation regimes is respectively 0.