Nonlinear Relationship Between Food Price Uncertainty and Food Security in Iranian Households: Evidence from GAS Modelling

Document Type : Research Article

Authors

1 Lecturer, Department of Economics, Faculty of Economics and Management, Urmia University, Iran

2 Professor, Department of Economics, Faculty of Economics and Management, University of Tabriz, Tabriz, Iran

Abstract

The main purpose of this study is to investigate the effect of food price uncertainty on food security in Iranian householdsduring the period 1981-2018 in a nonlinear model. To estimate uncertainty, the Generalized Autoregressive Score Model, and to estimate the effect of food price uncertainty on food security, the Smooth Transition Autoregressive model has been used. The results show that food price uncertainty in the first regime (low level of investment in agriculture) has a negative and significant effect and in the second regime (high level of investment in agriculture) has a negative and non-significant effect on food security. In the first regime, where the level of investment in the agricultural sector is below the threshold, as food price fluctuations increase, market uncertainty increases and signals with less transparency to producers and consumers. Under these circumstances, consumers will face the problem of reduced purchasing power and insecurity in access to food, which has a negative impact on food security. While, in the second regime and increasing the level of investment in the agricultural sector, the negative effects of uncertainty on food security can be partially offset. According to the results of the present study, officials should take effective steps on one hand, by prioritizing the financing of investment in the agricultural sector and facilitating the conditions of activity of the private and cooperatives sector in this field like moving from traditional to industrial agriculture. On the other hand, to reduce the price gap, regulate the market demand of agricultural products, and create conditions for food price stability, create a kind of protection against short-term fluctuations and shocks.

Keywords


Alimi, M., Rhif, A. and Rebai, A. (2017). “Nonlinear Dynamic of the Renewable Energy Cycle Transition in Tunisia: Evidence from Smooth Transition Autoregressive Models”, International Journal of Hydrogen Energy, 42(13), 8670-8679.
Applanaidu, S. D., Abu Bakar, N. A. and Baharudin, A. H. (2014). “An Econometric Analysis of Food Security and Related Macroeconomic Variables in Malaysia: A Vector Autoregressive Approach (VAR)”, UMK Procedia, 1, 93-103.
Arndt, C. Farmer, W. Strzepek, K. and Thurlow, J. (2012). “Climate Change, Agriculture an
d Food Security in Tanzania”, Review of Development Economics, 16(3), 378-393.
Bagherzadeh Azar, F. (2017). “Food security and Impact of Economic Factors on it in Iran”, Economic Science Ph.D. Thesis, Tabriz University, Faculty of Economics, Management and Commerce (In Persian).
Barrett, C. B. (2002). "Food security and food assistance programs," Handbook of Agricultural Economics, in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 2, chapter 40, 2103-2190, Elsevier.
Block, S.A., Kiess, L., Wbb, P., Kosen, S., Moench-Pfanner, R., Bloem, M.W. and Timmer, C.P. (2004). “Macro shocks and micro outcomes: child nutrition during Indonesia's crisis”, Economics & Human Biology, 2, 21-44.
Bollerslev, T. (1986). “Generalized Autoregressive Conditional Heteroscedasticity”, Journal of Econometrics, 31(3), 307-327.
Boratynska, K. and Huseynov, R. T. (2017). “An Innovative Approach to Food Security Policy in Developing Countries”, Journal of Innovation and Knowledge, 2(1), 39-44.
Breisinger, C., Ecker, O., Al-Riffai, P. and Yu, B. (2012). “Beyond the Arab awakening: policies and investments for poverty reduction and food security”. IFPRI Food Policy Report,p. 25.
Candel, J. J. L., Breeman, G. E., Stiller, S. J. abd Termeer, C. J. A. M. (2014). “Disentangling the consensus frame of food security: The case of the EU Common Agricultural Policy reform debate”, Food Policy, 44, 47–58.
Chen, C. C., Shih, J. C., Chang, C. C. and Hsu, S. H. (2015). “Trade Liberalization and Food Security: A Case Study of Taiwan Using Global Food Security Index (GFSI)”, Agricultural Economics Association Annual Meeting, San Francisco, CA, July 26- 28.
Chen, R. and Xu, J. (2019). “Forecasting volatility and correlation between oil and gold prices using a novel multivariate GAS model”, Energy Economics, 78, 379-391.
Creal, D., Koopman, S. J. and Lucas, A. (2013). “Generalized autoregressive score models with applications”. Journal of Applied Econometrics, 28(5), 777–795.
Diaz- Bonilla, E. and Ron, J. F. (2010). “Food Security, Price Volatility and Trade: Some Reflection for Developing Countries”, ICTSD Programme on Agricultural Trade and Sustainable Development. Issue Paper No. 28.
Engle, R. F. (1982). "Autoregressive Conditional Heteroscedasticity with Estimates of Variance of United Kingdom Inflation", Econometrica. 50 (4): 987–1008. doi:10.2307/1912773. JSTOR 1912773. (the paper which sparked the general interest in ARCH models)
Eslami M R. and Baghestany. A. (2020). “Modeling the Impact of Inflation Uncertainty on Food Sector Growth”, Journal of Nutrition and Food Security, 5 (1), 85-92.
FAO. (2006). Policy Brief, Food Security. Issue 2.
FAO. (2015). The State of Food Insecurity in The World, International Hunger Targets: Taking Stock of Uneven Progress.
Friedman, M. (1977). “Nobel lecture: inflation and unemployment”. Journal of political economy, 85, 451-472.
Gubert, M. B., Spaniol, A. M., Segall-Corrêa, A. M. and Pérez-Escamilla, R. (2017). “Understanding the double burden of malnutrition in food insecure households in Brazil”, Maternal and Child Nutrition, 13(3).
Gustafson, D. J. (2013). “Rising Food Costs and Global Food Security: Key Issue and Relevance for India”, Indian Journal of Medical Research, 138 (3), 398- 410.
Headey, D. (2013). “Developmental Drivers of Nutritional Change: A Cross – Country Analysis”. World Development, 42, 76-88.
Hensen, B. E. (1999). “Threshold effect in non-dynamic panels: estimation, testing and inference”, Journal of Econometrics, 93(2), 345-368.
Hubbard, D. (2007). How to measure anything: finding the value of intangibles in business. John Wiley & Sons.
Hurst, H. E. (1951). The long-term storage capacity of reservoir. Transactions of the American Society of Civil Engineers 116, Paper 2447, Published in 1950 as Proceedings-Separate No. 11
Ito, T. and Kurosaki, T. (2009). “Weather Risk, Wages in Kind, and the Off-Farm Labor Supply of Agricultural Households in a Developing Country”, American Journal of Agricultural Economics, 91(3), 697–710.
Kadilli, A. and Markov, N. (2011). “A Panel Smooth Transition Regression Model for the Determinants of Credibility in the ECB and the Recent Financial Crisis”, Working Papers, University of Geneva, 11092: 1-40.
Kalkuhl, M., Kornher, L., Kozicka, M., Boulanger, P. and Torero, M. (2013). Conceptual Framework on Price Volatility and Its Impact on Food and Nutrition Security in the Short Term. Food Secure, European Union Seventh Framework Programme.
Karimi Takanlou, Z., Ranjpour, R., Motafakkerazad, M. A., Assadzadeh, A. and Bagherzadeh Azar, F. (2018). “A New Approach for Estimating the Food Security Level in Iran with the GFSI Index and Studying the Influence of Price Indexes and Population on It”, Agricultural Economics and Development, 26(101), 181-218 (In Persian).
Kargbo, JM. (2005). “Impacts of Monetary and Macroeconomic Factors on Food Prices in West Africa, Agricultural Economics Research”, Policy and Practice in Southern Africa, 44(2), 205-224.
Kneafsey, M., Dowler, E., Lambie- Mumford, H., Inman, A. and Collier, R. (2013). “Consumers and food Security: uncertain or empowered?” Journal of Rural Studies, 29, 101-112.
Kontonikas, A. (2004). “Inflation and inflation uncertainty in the United Kingdom, evidence from GARCH modelling”. Economic Modelling, 21(3), 525-543.
Logue, D.E. and Sweeney, R.J. (1981). “Inflation and real growth: Some empirical results: Note”. Journal of money, credit and banking, 13(4), 497-501.
Makatjane, K. D., Xaba, D. L. and Moroke, N. D. (2017). “Application of Generalized Autoregressive Score Model to stock returns”. International Journal of Economics and Management Engineering, 11(11), 2549- 2552.
Mandelbort, B. (1972). “Statistical methodology for nonperiodic cycles: from the covariance to R/S analysis”. Annals of Economic and Social Measurement, 1(3), 259-290.
Muller, N. and Yohai, V. (2008). “Robust estimates for GARCH models”. Journal of Statistical Planning and Inference, 138(10), 2918-290.
Peng, X., Marchant, M. A. and Reed, M. R. (2004). “Identifying Monetary Impacts on Food Prices in China: A VEC Model Approach”, Agricultural and Applied Economics Association, Annual Meeting, August 1-4.
Pinstrup-Andersen, P., Watson, D., Frandsen, S., Kuyvenhoven, A. and Von Braun, J. (2011). Food Policy for Developing Countries: The Role of Government in Global, National, and Local Food Systems. Ithaca; London: Cornell University Press. doi:10.7591/j.ctt7v910
Sen, A. (1999). Development as Freedom. A. Knopf (Ed.), Oxford University Press, New York
Radimer, K.L., Olson, C.M., Greene, J.C., Campbell, C.C. and Habicht, J.P. (1992). “Understanding hunger and developing indicators to assess it in women and children”, Journal of Nutrition Education, (24), 36-45.
Rahman, S. and Serletis, A. (2012). “Oil price uncertainty and the Canadian economy: Evidence from a VARMA, GARCH-in-Mean, asymmetric BEKK model”. Energy Economics, 34(2), 603-610.
Rudolf, r. (2019). “The impact of maize price shocks on household food security: Panel evidence from Tanzania”. Food Policy, 85,40-54.
Tamson, A. and Metz, M. (1998). Implication of Economic Policy for Food Security: A Training Manual, Agricultural Policy Support Service Policy Assistance Division, Food and Agricultural Organization of the United Nation.
Torlesse, H., Kiess, L. and Bloem, M.W. (2003). “Association of Household Rice Expenditure with Child Nutritional Status Indicates a Role for Macroeconomic Food Policy in Combating Malnutrition”, The Journal of Nutrition, 133, 1320-1325.
Terasvirta, T. and Anderson, H. M. (1992). “Characterizing nonlinearities in business cycles using smooth transition autoregressive models”. Journal of Applied Econometrics, 7(1), 119-136
UNDPI. (1998). Universal Declaration of Human Rights, United Nations Department of Public Information, New York, NY.
United Nation. (2015). The Millennium Development Goals Report.
Vaitla, B., Coates, J.  Glaeser, L. Hillbruner, C.  Biswal, P. and Maxwell, D. (2017). “The measurement of household food security: Correlation and latent variable analysis of alternative indicators in a large multi-country dataset”, Food Policy, 68, 193-205.