The Impacts of Oil Price Shocks, Exchange Rate on Food Prices in Urban Areas of Iran

Policy makers in Iran is highly concerned about increase in food prices. So that to identify factors affecting it is important. Accordingly, this study was carried out with the aim of identifying the relationship between oil shocks, exchange rate and food prices in urban areas of Iran in the period 2002-2014. In the research PANEL VAR with GMM method and EGHARCH was used. The results of the model and the relationships between variables in the form of response functions, variance analysis, Granger causality panel in the period studied suggests that oil shocks in the short term did not have significant effect on food prices. But food prices shocks and exchange rate explain 74 and 24 percent of food prices shocks. Therefore, managing the exchange rate would prevent shocks on food prices.