Analysis of Factors Affecting Food Price in Iran with Emphasis on Oil Shocks

Iran is a heavily oil dependent country and imports relatively high amounts of agricultural products. A number of studies in recent years indicate that oil price shocks affect food price in Iran. The aim of this paper is considering the impact of oil price shocks among other variables such as food production، real per capita income، intra industry trade and liquidity on food price in Iran. For this purpose، Hodrick-Prescott filter were used to obtain the oil price shocks using annual observations for 1975-2008 period. Then، Johanson-Joselius and Error-Correction models applied to estimate long and short term relations. The results revealed that co- integration among all variables is existed and oil price shocks significantly affect food price in the long run. The error correction term (-0. 18) is found to be negative suggesting a slow adjustment process.