Document Type: Original Article

Authors

1 Assistant Professor, Department of Economics, University of Mazandaran, Iran

2 Associate Professor, Department of Economics, University of Mazandaran, Iran

3 Professor at Department of Economics, University of Mazandaran

4 Assistant Professor at Department of Agricultural Economic, Sari, University of Agricultural Sciences and Natural Resources

Abstract

Since some raw materials, semi manufactured, intermediate and capital goods in agricultural sector are imported, the exchange rate fluctuations can affect the cost price of products in this sector. Recently, we are facing considerable fluctuations in exchange rate that has an important impact on all sectors including the agriculture. As a result of an increase in import prices in agricultural raw materials, the exchange rate fluctuates. In other words, this relationship is strengthened by lower domestic supply due to the stimulation of the exports of agricultural products induced by an increase in exchange rate. The present study deals with the impact of exchange rate fluctuations on agricultural price index in Iran using MGARCH method. The results show that the past shocks of exchange rate have a positive impact on agriculture price index at the 1% significance level. Moreover, despite the fact that the current fluctuations of agriculture price index do not relate to its past fluctuations, the past fluctuations of exchange rate have a positive impact on current fluctuations of exchange rate.

Graphical Abstract

Highlights

Since some raw materials, semi manufactured, intermediate and capital goods in agricultural sector are imported, the exchange rate fluctuations can affect the cost price of products in this sector.

Recently, we have been facing considerable fluctuation in exchange rate that has an important impact on all sectors, including the agriculture.

The results show that the past shocks of exchange rate have a positive impact on agriculture price index at the 1% significance level.

Fluctuations of exchange rate and agriculture price index demonstrate the instability of the economy, so the government should adopt monetary and fiscal policies to reduce the fluctuations of exchange rate market.

Keywords

Main Subjects

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