Linkages between the actual guaranteed price of wheat and its yield in Tehran province

Document Type : Research Paper

Authors

1 Department of Agricultural Economics, University of Tehran, Karaj, Iran.

2 Department of Agricultural Economics, University of Tehran, Karaj, Iran

Abstract

The aim of this study is to estimate the linkages between the actual guaranteed price of wheat and its yield in Tehran province during 2000-2018 by considering the dummy variables of development programs of the Islamic Republic of Iran. This study used the Augmented Dickey-Fuller stationary test, the Johansen Cointegration test, and the Vector Error Correction Model (VECM) to achieve the aim. The results show that the actual guaranteed price of wheat and its yield are of grade I (1), and based on the Johansen test, the long-run relationship between them is confirmed. The results of the VECM model show that the actual guaranteed price of wheat has a positive and significant effect on wheat yield in Tehran province. By a one percent increase in the actual guaranteed price of wheat, the yield will increase 1.07 percent. Also, the coefficient of vector error correction indicates that if in the short-run occurs a sudden shock to the actual guaranteed price of wheat, it will take about 2 periods to adjust the effect of this shock. Considering that the yield is elastic to the actual price of wheat, suggesting to estimate the guaranteed price of wheat, based on actual price (deflated) in the purchasing policy, can encourage the improvement of wheat yield in the country's agricultural lands.

Keywords

Extended Abstract

Introduction

Given the strategic importance of wheat in the basket of Iranian household goods and its importance from a policy perspective, it is useful to evaluate the effects of government policies to support wheat producers in the provinces of Iran during development programs. The aim of this study is to estimate the linkages between the actual guaranteed price of wheat and its yield in Tehran province during 2000-2018 by considering the dummy variables of development programs of the Islamic Republic of Iran.

 

Materials and Methods.

This study used the Augmented Dickey-Fuller stationary test, the Johansen Cointegration test, and the Vector Error Correction Model (VECM) to achieve the aim.

 

Results and Discussion

The actual guaranteed price of wheat and yield is stable at level I (1), and the optimal lag is the second lag. Based on the Cointegration test there is one long-run relationship between used variables. Therefore, The VECM model is estimated. The results of the VECM model show that the actual guaranteed price of wheat has a negative and significant effect on wheat yield in Tehran province. By a one percent increase in the actual guaranteed price of wheat, the yield will increase 1.07 percent. Also, the coefficient of vector error correction indicates that if in the short-run occurs a sudden shock to the actual guaranteed price of wheat, it will take about 2 periods to adjust the effect of this shock.

 

Conclusions

The results of the VECM model show that the actual guaranteed price of wheat has a positive and significant effect on wheat yield in Tehran province. By a one percent increase in the actual guaranteed price of wheat, the yield will increase 1.07 percent. Also, the coefficient of vector error correction indicates that if in the short-run occurs a sudden shock to the actual guaranteed price of wheat, it will take about 2 periods to adjust the effect of this shock. Considering that the yield is elastic to the actual price of wheat, suggesting to estimate the guaranteed price of wheat, based on actual price (deflated) in the purchasing policy, can encourage the improvement of wheat yield in the country's agricultural lands.

References

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Iranian Journal of Agricultural Economics and Development Research
Volume 54, Issue 1
March 2023
Pages 293-303

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