Effect of Oil Price on Food Price Index in IRAN under Uncertainty Condition

The process of increases global oil and food prices in recent years is concerned economists to examine the relationship between these variables. The main objective of this paper is to determine the impact of oil price on food prices index during the period 1990-2011 under uncertainty condition. For this purpose, first based on Alghalit (2010) empirical study and microeconomic foundations, the model has been designed between oil and food prices under uncertainty condition for Iranian Economy. Then, coefficients of this model are estimated by using the nonlinear least squares (NLS) econometric approach. The results indicated a positive but few impact of expected crude oil prices and it's uncertainty on the expected food price index that can be result the payment of government subsidies to the energy sector. So that with increase (decrease) 10 units (dollar) in the expected price of crude oil and its volatility, increases (decreases) the expected food price index respectively about 1.4 and 0.8 unit. According to the other results, with increase in supply and export of crude oil, expected food prices are decrease.