Pass-Through Effects of Global Food Prices on Consumer Prices in Iran

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.