News

a.z
Shabanzadeh-Khoshrody, M., javdan, E., Rafaati, M. (2023). Investigating the Effect of Exchange Rate Fluctuations on Food Consumption in Rural Areas of Iran. , 31(3), 59-88. doi: 10.30490/aead.2023.361801.1510
Mehdi Shabanzadeh-Khoshrody; Ebrahim javdan; Mohsen Rafaati. "Investigating the Effect of Exchange Rate Fluctuations on Food Consumption in Rural Areas of Iran". , 31, 3, 2023, 59-88. doi: 10.30490/aead.2023.361801.1510
Shabanzadeh-Khoshrody, M., javdan, E., Rafaati, M. (2023). 'Investigating the Effect of Exchange Rate Fluctuations on Food Consumption in Rural Areas of Iran', , 31(3), pp. 59-88. doi: 10.30490/aead.2023.361801.1510
Shabanzadeh-Khoshrody, M., javdan, E., Rafaati, M. Investigating the Effect of Exchange Rate Fluctuations on Food Consumption in Rural Areas of Iran. , 2023; 31(3): 59-88. doi: 10.30490/aead.2023.361801.1510

Investigating the Effect of Exchange Rate Fluctuations on Food Consumption in Rural Areas of Iran

اقتصاد کشاورزی و توسعه
Article 3, Volume 31, Issue 3 - Serial Number 123, December 2023, Pages 59-88    PDF (600.87 K)
Document Type: Original Article
DOI: 10.30490/aead.2023.361801.1510
Authors
Mehdi Shabanzadeh-Khoshrody* 1; Ebrahim javdan2; Mohsen Rafaati3
1Corresponding Author . Assistant Professor of Agricultural Economics, Institute of Planning Research, Agricultural Economics and Rural Development, Tehran, Iran
2Assistant Professor of Agricultural Planning, Economic and Rural Development Research Institute (APERDRI)
3Assistant Professor of Agricultural Economics, Institute of Planning Research, Agricultural Economics and Rural Development, Tehran, Iran
Abstract
Introduction: Exchange rate is a variable that can affect the performance of economy and economic variables. By any change in the exchange rate, food prices and consequently, food consumption is affected. The exchange rate is one of the most important factors affecting the food consumption due to its effects on the price of imported goods. Fluctuations in the exchange rates and consequently, food price fluctuations, by affecting the access dimension, make it impossible to realize food security. With this approach, in the present study, the effects of fluctuations in free market exchange rates on the food consumption in rural areas of Iran were examined. In addition, in order to examine the effectiveness of government policies to control currency fluctuations over recent years, the effect of preferential currency subsidy policy on consumption in the rural areas was analyzed. Achieving these goals provides the necessary knowledge to modify current policies or adopt new currency policies.
Materials and Methods: Theoretical model of the research was first explained by applying theoretical foundations and various studies. Then, the information needed to conduct the study was collected during the period of 2005-2021. Next, the stationary of the model variables was examined through Levin, Lin and Chu (LLC) and Fisher-Dickey Fuller (Fisher-ADF) tests. Finally, the short and long term relationship between variables analyzed in the formwork of ARDL panel model.
 Results and Discussion: The results showed that the increase in exchange rate fluctuations reduced household consumption in rural areas in the short and long terms; in addition, although the preferential currency subsidy policy had a positive and significant effect on the household consumption, this effect was not noticeable. On the other hand, based on the results, the price index of food groups had a negative effect on the food consumption in the rural areas of Iran in the short and long terms and by contrast, the increase in household income had a positive and significant effect on the food consumption in the rural areas in the short and long terms. Finally, the results of the Error Correction Model (ECM) showed that due to the low speed of adjustment, currency shocks had a long lasting effect (nearly two years) on food prices in Iran's economy.
Conclusions: According to the study results, the preferential currency policy does not provide the possibility of achieving the goal of food consumption stability; therefore, it is necessary to remove it and use managed floating currency policies. With the removal of the mentioned policy in order to support the food security of the weak classes of the society in the short term, the distribution of food packages through trustee institutions including the relief foundation and the welfare organization can be considered. The cash-in-kind payment policy is also one of the policies that can provide more appropriate distribution of subsidies in the short term. However, in the long term, increasing or stabilizing the purchasing power of people, especially the low-income and weak classes, is only possible through employment creation policies as well as strengthening production and supply.
 
Keywords
Exchange Rate Fluctuations; Preferential Currency Subsidy Policy; Rural Areas; Food Consumption; ARDL Panel Model
References
  • Abbott, P., & Borot de Battisti, A. (2011). Recent global food price shocks: causes, consequences and lessons for African governments and donors. Journal of African Economies, 20(1), 12-62.
  • Allahyari, R., Yousefi Sheikh Robat, M.R. & Elahi, N. (2020). Structural barriers to foreign direct investment in Iran using PCA and ARDL methods. Journal of Economic Studies and Policies, 7(1), 95-119. [In Persian]
  • Anríquez, G., Daidone, S. & Mane, E. (2013). Rising food prices and undernourishment: a cross-country inquiry. Food Policy, 38, 190-202.
  • Bahmani-Oskooee, M., & Xi, D. (2012). Exchange rate volatility and domestic consumption: evidence from Japan. Economic Systems, 36(2), 326-335.
  • Bahmani-Oskooee, M., Kutan, A.M. & Xi, D. (2015). Does exchange rate volatility hurt domestic consumption? Evidence from emerging economies. International Economics, 144, 53-65.‏
  • Chishti, M.Z., Azeem, H.K., Mahmood, F. & Sheikh, A. (2019). Exchange rate volatility and domestic consumption: a comparative study of developed, developing and emerging economies. International Journal of Accounting and Financial Reporting, 9, 164-179.
  • Chou, K.W. (2019). Re-examining the time-varying nature and determinants of exchange rate pass-through into import prices. The North American Journal of Economics and Finance, 49, 331-351.
  • Conforti, P., Pierani, P.P. & Rizzi, P.L. (2001). Food and nutrient demands in Italy. Actual behavior and forecast through a multistage quadratic system with heterogeneous preferences. Available at https://ssrn.com/abstract=253055 or http://dx.doi.org/10.2139/ssrn.253055.
  • Dercon, S., & Krishnan, P. (1998). Changes in poverty in rural Ethiopia 1989-1995: measurement, robustness tests and decomposition. Centre for the Study of African Economies, Institute of Economics and Statistics, University of Oxford. Available at https://www.researchgate.net/publication/5020262.
  • Ebrahimi, M., Mamipour, S. & Movahedi, S.F. (2018). Investigating the asymmetric effects of real exchange rate fluctuations on private sector consumption in Iran: NARDL approach. Economic Research and Policies, 26(87), 345-309. [In Persian]
  • Esmaeili Moghaddam, A.R. (2020). Investigating the relationship between foreign trade and economic growth in member countries of the Islamic Conference. Journal of Humanities and Islamic Strategic Studies, 26(3), 93-104. [In Persian]
  • Ginn, W., & Pourroy, M. (2019). Optimal monetary policy in the presence of food price subsidies. Economic Modelling, 81, 551-575.
  • Hausman, J.A. (1978). Specification tests in econometrics. Econometrica: Journal of the Econometric Society, 46(6), 1251-1271.
  • Hosseini, S.S., Pakravan Charvadeh, M.R. & Salami, H. (2016). The effect of implementing the policy of targeting subsidies on food security in Iran. Iranian Journal of Economic Research, 21(67), 53-82. [In Persian]
  • Ikuemonisan, E., Ajibefun, I. & Mafimisebi, T.E. (2018). Food price volatility effect of exchange rate volatility in Nigeria. Review of Innovation and Competitiveness: A Journal of Economic and Social Research, 4(4), 23-52.‏
  • Iddrisu, A.A., & Alagidede, I.P. (2020). Monetary policy and food inflation in South Africa: a quantile regression analysis. Food Policy, 91, 101816. DOI: 1016/j.foodpol.2019.101816.
  • IPRC (2019). The alternative support policies for preferred currency. Report No. 16430. Islamic Parliament Research Center (IPRC) of Iran. [In Persian]
  • Iyke, B.N., & Ho, S.Y. (2020). Consumption and exchange rate uncertainty: evidence from selected Asian countries. The World Economy, 43(9), 2437-2462.
  • Jafari, R., Mazloumi, N. & Safari, A. (2019). Presenting a new method for calculating the market risk coefficient of the financial wealth model of Iran's insurance industry: the ARDL-GARCH approach. Iranian Journal of Insurance Research (IJIR), 34(3), 9-37. [In Persian]
  • Karim, M.H., Ghaemi Asl, M. & Mousavi Qasemi, S.M. (2021). The effect of sanctions on domestic consumption expenditures of households with an emphasis on exchange rate fluctuations and national income. Journal of Urban Economics and Management, 9(34), 69-84. [In Persian]
  • Laborde, D., Lakatos, C. & Martin, W.J. (2019). Poverty impact of food price shocks and policies. World Bank Policy Research Working Paper, 8724.
  • Lotfi Heravi, M.M., & Aghajani, F. (2021). Investigating the effect of real exchange rate and its fluctuations on private sector consumption in Iran. The Second International Conference on New Challenges and Solutions in Industrial Engineering and Management and Accounting, Damghan, Iran. [In Persian]
  • Meade, B., & Thome, K. (2017). International food security assessment, 2017-2027. Food Security Assessment Situation and Outlook No. (GFA-28) 46 pp.‏
  • Mohseni Zonouzi, S.J., Feizi, S. & Mousavi, A. (2017). The effect of exchange rate and exchange rate uncertainty on domestic consumption in Iran. Quarterly Journal of Applied Theories of Economics, 4(3), 195-214. Available at https://ecoj.tabrizu.ac.ir/article_6811_78c7c93ea607ec7aa890e7ddd8ce6ba8.pdf. [In Persian]
  • Mukalayi, N. (2021). Does exchange rate volatility reduce South African domestic consumption? SA-TIED Working Paper 160. SA-TIED Young Scholars Programme, South Africa-Towards Inclusive Economic Development (SA-TIED).
  • Mumtaz, S., & Ali, M. (2022). Impact of exchange rate and its volatility on domestic consumption in India and Pakistan. Journal of Public Affairs, 22(2), e2479.
  • Najafi Shariatzadeh, I., Shabanzadeh-Khoshroudy, M. & Zomorodian, G. (2017). Examining the effective factors on commercial bank profitability of Iran using panel ARDL method. Financial Engineering and Securities Management (Portfolio Management), 7(29), 151-172. [In Persian]
  • Oseni, I.O. (2016). Exchange rate volatility and private consumption in Sub-Saharan African countries: a system-GMM dynamic panel analysis. Future Business Journal, 2(2), 103-115.‏
  • Pesaran, M.H., & Pesaran, B. (1997). Working With Microfit 4.0: interactive econometric analysis. Oxford: Oxford University.
  • Pesaran, M.H., & Shin, Y. (1999). An autoregressive distributed lag modelling approach to cointegration analysis (Chapter 11). In: S. Strom (Ed.) Econometrics and economic theory in 20th century: the Ragnar Frisch Centennial Symposium. Cambridge: Cambridge University.
  • Pesaran, M.H., & Smith, R.P. (1998). Structural analysis of cointegrating VARs. Journal of Economic Survey, 12, 471-505.
  • Pesaran, M.H., Shin, Y. & Smith, R.J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16, 289-326.
  • Pistaferri, L. (2015). Household consumption: research questions, measurement issues, and data collection strategies. Journal of Economic and Social Measurement, 40(1-4), 123-149.
  • Rafati, M., Shabanzadeh-Khoshroudy, M. & Javdan, E. (2021). Nutrient consumption, diversity and food security in income deciles of Tehran province. Journal of Agricultural Economics and Development, 35(2), 147-160. [In Persian]
  • Reboredo, J.C., & Ugando, M. (2014). US dollar exchange rate and food price dependence: implications for portfolio risk management. The North American Journal of Economics and Finance, 30, 72-89.
  • Rudolf, R. (2019). The impact of maize price shocks on household food security: panel evidence from Tanzania. Food Policy, 85, 40-54.‏
  • Tavakoli Kashani, A., Sartibi, Z. & Afsharpoor, M. (2019). The model of simultaneous effects of two economic macroscale variables, GDP and gasoline price, on road traffic fatalities by panel data. Journal of Transportation Research, 1(16), 29-42. [In Persian]
  • Zaki, N., Meskinyar, M.S., Shaker, A. & Ansari, S.M.M. (2020). Investigating the effect of exchange rate uncertainty on the consumption of Iranian households (1981-2017). The Second International Conference on Innovation in Business Management and Economics, Tehran, Iran. [In Persian]
  • Zarei, M., Heydari, H. & Jalili Kamjou, S.P. (2019). Spatial evaluation of exchange rate fluctuations on the consumption of durable goods by urban households in the provinces of Iran. Quarterly Journal of New Economy and Trade (QJNET), 14(4), 81-106. [In Persian]
  • Zhao, Y. (2020). The influence and impact of the exchange rate on the economy. In E3S Web of Conferences (Vol. 214, p. 03007). EDP Sciences. DOI: 1051/e3sconf/202021403007.
  • Zheng, Z., & Henneberry, S. R. (2012). Estimating the impacts of rising food prices on nutrient intake in urban China. China Economic Review, Elsevier, 23(4), 1090-1103. DOI: 10.1016/j.chieco.2012.07.001.
Statistics
Article View: 452
PDF Download: 289


counter
Journal management system. designed by sinaweb