A.A. Baghestany
Abstract
Introduction: Developing economies suffer from high degree of macroeconomic uncertainty. Growth, inflation, real exchange rates and other key macroeconomic variables are much more volatile, and the consequences of this excess volatility for aggregate performance in several dimensions like growth, investment ...
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Introduction: Developing economies suffer from high degree of macroeconomic uncertainty. Growth, inflation, real exchange rates and other key macroeconomic variables are much more volatile, and the consequences of this excess volatility for aggregate performance in several dimensions like growth, investment and trade, have attracted some attention in recent empirical literature. In the case of investment, this concern has been renewed by recent theoretical work identifying several channels through which uncertainty can impact investment, under various assumptions about risk aversion, adjustment costs to investment and other factors. Iran, has a high degree of uncertainty in the macroeconomic variables. One of the major challenges related to the management of the foreign exchange market in Iran comes back to agricultural investment. Among different investments in economic sectors, investment in agricultural sector possesses a special prominence and position since investment in agricultural sector not only induce the growth of production and employment in this very sector, but also encourages production and employment growth in other economic sectors. Therefore, identifying effective factors on investment in agricultural sector and adopting suitable policies for increasing investment, possesses a supreme prominence. In Iran, the notions of finance and investment have always been facing several difficulties due to deep independence to oil revenues and instability of its price as well as high risk it involves; and for this reason, investing in different sectors, including agriculture, has always experienced severe fluctuations.Materials and Methods: Data on agricultural investment in Iran were provided by annual statistics from 1978-2016. All of the following data were gathered from the statistical office of the Central Bank of Iran including Investment in agricultural sector in Rials using a constant price of 2011 = 100, Annual real GDP using a constant price of 2011 = 100, Short run interest rate on bank facilities and loan, and loans given to agricultural sector by banks.NARDL Method When the order of integration is not the same for all variables then we use the lagged variables as proposed by Pesaran et al. (2001). Imagine two variables and their relation as follow: To check the asymmetries, we have to make a separate series for appreciation and depreciation as proposed by Bahmani-Oskooee and Soharabian (1992). A series of exchange rate will be divided in its positive movements or appreciation, as indicated by, and negative movements or depreciation, as indicated by, and is given as follows: To check the impact of positive and negative movements of one variable on the other variable, Equation above will be transformed as: The non-linear ARDL model can be described as follows Results and Discussion: In order to study the nonlinear effect of exchange rate and its shock on investment in agricultural sector, a NARDL model has been used. The results of Ramsey Reset Test show that the model is well-specified. LM test has been applied to investigate auto correlation. The results of LM test also reveal that the zero hypothesis is not rejected, and the final model does not have the problem of consistent correlation. The Breusch-Pagan-Godfrey Test (BPG) has been employed to investigate the phenomenon of heteroskedasticity. The results of this test also indicate that for the final model, the zero hypothesis is not rejected, and therefore the pattern do not have the problem of Heteroskedasticity. Positive shocks of exchange rate have shown a negative impact on agricultural investment in the current and previous two periods. While negative shocks of exchange rate have had a positive effect on current investment. NARDL pattern is a method which considers the short-run dynamics among the variables and estimates the long-run relationships as well. In this pattern first the dynamic model, then the long-run relation and error correcting pattern are fitted. The results of the Wald test show that the hypothesis of symmetry between positive and negative shocks is rejected and hence the effect of currency shocks is asymmetric. In the long run, changes in positive currency shocks have had a negative effect on investment. Results of F test also approve the long run relation. H0 is rejected and the presence of long-run relation is confirmed. The presence of co-integration among a set of economic variables provides a statistical base for using the error correction pattern. In the short term, current currency shocks and the previous two period currency shocks have had a negative and significant impact on agricultural investment. In Short term, changes in negative shock had no effect on investment. Also, after 1.5 periods, the short-term imbalances are adjusted in the long run.Conclusion: This study used a non-linear autoregressive distributed lag (NARDL) model to check an asymmetrical relationship between Exchange volatilities and agricultural Investment. In current study, the Hodrick Prescott filter has been used to derive exchange rate volatilities. Results have shown that: 1) there is a negative and significant relationship between exchange rate shocks and investment in the agricultural sector in the short and long term. 2) With respect to negative impact of exchange rate on investing in agricultural sector, if this exchange rate increases remain stable, investment in the agricultural sector would decline very severe. Given the direct and historical impact of investing in the current period, investment will also be a problem for future years. Since given loan have had a positive impact on the investment, it is suggested that government increases these loans and facilities. The purpose of this policy is to prevent current investments decreases. 3) With respect to negative reaction of investment to US-Dollar-denominated shocks, the decline in US-Dollar dependency and the use of other high-yielding currencies such as the EURO currencies are appropriate. There are asymmetrical linkages between these two variables therefore negative exchange rate volatilities have positive effect and positive exchange rate volatilities have negative and significant effect on agricultural investment. The effect of negative shocks was less than the positive ones.
H. Sherafatmand; A.A. Baghestany
Abstract
Introduction: Agricultural prices are one of the most important tools for resource allocation in an economy. Evidence suggests that, agricultural prices in comparison with other goods prices have more volatility. If these volatility leads to asymmetric price transmission, this subject will be very important. ...
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Introduction: Agricultural prices are one of the most important tools for resource allocation in an economy. Evidence suggests that, agricultural prices in comparison with other goods prices have more volatility. If these volatility leads to asymmetric price transmission, this subject will be very important. In other words, if changes in the market price are not absolutely transferred between levels, asymmetric price transmission has occurred, which is leading to increased marketing margin. Price transmission in different market levels related to the marketing efficiency, which also affected the welfare of producers and consumers. Dates, among all horticultural crops, with a share of 10% of the planted area in our country, after the pistachios and grapes were located in the third highest level, and with 6.5 percent of the total horticulture products after grapes, apples and oranges, are in the fourth highest level. Iran Dates from global production share is 14% in 2012. Despite of important Dates, Dates producers, suffer from volatility and low price of this product. Dates owners considerable expenses for crop production, including purchasing, supply of fertilizers and pesticides, irrigation (water and electricity costs) and the cost of labor in planting and harvesting spent, but in most cases they not only benefit from production, but also sell it below cost. According to the phenomena that Dates owners are not marketed through cooperatives, so farmers are the victims and intermediaries benefited. In such an environment, the marketing of dates, have a significant impact on how prices transmitted. In policy debates, asymmetric price transmission is a phenomenon that arises from imperfect competition in the market and it would be imposing additional costs to consumers. Having this information will help policy makers to adopt the correct policies.
Materials and Methods: To achieve the aims of this study which determines the mechanism of price transmission in dates market bivariate GARCH model was used. Developments of ARCH and GARCH models take into account the nature of the phenomenon Volatility in financial and prices error component regression equations. ARCH model was first introduced by Engle and augmented GARCH model was first introduced by Bollerslev. Due to Conditional variance Heteroscedasticity, ARCH and GARCH models are widely used but little attention has been to this interaction. For this purpose, bivariate GARCH models developed. This study determined the mechanism of price transmission in date's market, over the period 1361: 1-1391: 4 with Diagonal VECH Bivariate GARCH model.
Results and Discussion: With the implementation of augmented Dickey-Fuller test, it was found that the time series producer price index and the consumer price index over the period 1361:1-1391:4 are stationary in first difference. In this study, also Hegy test used for stationary of variables. In this test the unit root hypothesis tested with different periods (for the monthly data used in this study up to 12 repetitions will examined). Next, Johansen co-integration test results showed that there was a long-term relationship between the producer price index and the consumer price index. Granger causality test results indicated that there was a one-way causal relationship from consumer price index to producer price index. The results of this study indicated that the producer price index volatility with one lag has a positive and significant impact on its current volatility. As the results indicated, the covariance coefficient is statistically significant, indicating the volatility spillover between the two levels of the market. The spillover of volatility indicated uncertainty in the retail market and in producers market. The results also indicated that a one unit increase in the consumer price index cause an increase in producer price index less than unity (0.003).
Conclusions: the price transmission in Dates market is incomplete. So it is recommended to policy makers and government for reducing price risk and producers stabilize income, perform market regulation policies and protection policies like as steward devices on the market to buy dates at harvest time and, it needed structural support like appropriate and timely packaging and ware housing which Can lead to an increase in the welfare of producers and consumers as well as reforms in incomplete dates market.
JEL classification: Q1-Q23-E3
R. Moghaddasi; H. Sherafatmand; A.A. Baghestany
Abstract
AbstractComparison of food prices in different periods, indicates fluctuations and continually upward trend. Any change in agricultural sector variables, as main food supplier, will affect food price. Productivity shocks and production gap are examples of such variables. In this paper ,Hodrick Prescott ...
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AbstractComparison of food prices in different periods, indicates fluctuations and continually upward trend. Any change in agricultural sector variables, as main food supplier, will affect food price. Productivity shocks and production gap are examples of such variables. In this paper ,Hodrick Prescott and Kalman filters are used as generators of productivity shocks and production gap series. Also for analyzing the impact of these variables on food prices growth during the 1976-2007 Johansen Cointegration test and VECM Model are applied. Main results indicated that, productivity shocks have a reverse effect while production gap has a positive and significant effect on food price. Also among all surveyed variables, the effect of negative productivity shock on food price is the greatest. Therefore more attention should be paid to management of negative shocks in comparison with positive ones. Productivity promotion and bridging the gap between actual and potential production can lead to control of agricultural prices.JEL classification: C22-E2-E3
