Study on the Impacts of Productivity Shocks and Production Gap on Food Price in Iran

Document Type : Research Article

Authors

• R. Moghaddasi ¹
• H. Sherafatmand ²
• A.A. Baghestany ²

¹ Department of Agricultural Economics, Science and Research Branch, Islamic Azad University

² Department of Agricultural Economics, Faculty of Agriculture, Islamic Azad University, Science and Research Branch, Tehran

10.22067/jead2.v1389i4.8200

Abstract

Abstract
Comparison 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.

Keywords: Productivity Shocks, Vector Error Correction, Hodrick Prescott Filter, Kalman filter, Production Gap

JEL classification: C22-E2-E3

20.1001.1.20084722.1389.24.4.12.1

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