Price Volatility Regime Switches in Iran's Meat Market Useing Markov Switching GARCH Models

Price volatility and volatility regime switching of Iranian important livestock markets are modeled using hay, sheep, calf, mutton, and beef monthly return series over the period of April 1992 to March 2014, using Markov-switching generalized autoregressive conditional hetroscedastisity models. The results suggest the existence of two volatility regimes in all studied markets and frequently switching from one regime to another all except for hay. Hay market is the most homogeneous market in terms of volatility regime switching while mutton market is the most variable one. According to results, although the high volatility regime lasts less than low volatility regime, persictency of high volatility regime (at least 5 month) in producer and retailer meat markets and frequently switching from one regime to another lead to uncertainty of investing in meat production. It also leads to unpredictability of market condition and variability of consumer’s welfare.