Factors Affecting on Price Stability of various Sectors of Iranian Economy

The main objective of this study is to investigate factors affecting price stability in different sectors of Iranian economy. Data set including variables of exchange rate, interest rate, liquidity and price indices of agriculture, industry and services sectors for 1971-2003 obtained from socio-economic time series database known as PDS, published by Management and Planning Organization. In order to trace response of endogenous variables to imposed shocks to error term, Vector Autoregressive method was used. The results showed that monetary variables including exchange rate, interest rate and money volume as well as price of service sector affect agricultural prices positively. Increment of industry prices would increase agricultural prices. In case of industry sector, it was found that increase in interest rate, money volume and agricultural prices had negative impact on agricultural prices and only service sector prices rose industry prices. Prices of service sector were affected by agricultural prices and exchange rate negatively, while interest rate, money volume and industry prices had positive impact on them.