An Examination of the Relationship between Food Prices and Government Monetary Policies in Iran

reserved. Readers may make verbatim copies of this document for non-commercial purposes by any means, provided that this copyright notice appears on all such copies. SH comm. 11-22-08 2 An Examination of the Relationship between Food Prices and Government Monetary Policies in Iran This study examines the relationship between food prices and monetary policy variables, using a Vector Error Correction Model (VECM) approach applied to annual data from 1976 to 2006. Results indicate that food prices in Iran have a long-run and short-run equilibrium granger causality relationship with money supply. More specifically, monetary policy reforms are shown to have a significant impact on food prices and domestic agricultural production. These policies influence consumption patterns and have serious implications for poverty reduction, food security issues, and agricultural growth in Iran