Dynamic Analysis of the Economic Effects of Wheat Pricing Policy in Iran: Application of Censored Quantile Autoregressive Method

this study investigates the dynamic effects of wheat price support policies in Iran, with a specific focus on their impact on market price fluctuations. The primary objective is to assess the effectiveness of guaranteed price policies in stabilizing wheat prices and their long-term consequences for the wheat market. Employing a Censored Quintile Autoregressive (CQAR) model and comprehensive wheat price data spanning 1989 to 2024 (1368-1403 Persian calendar), this research examines how support policies influence price distribution in both short and long terms. The study also utilizes Monte Carlo simulation techniques to evaluate different price support scenarios findings reveal that price support policies significantly mitigate price volatility, particularly in lower quintiles (0.1 and 0.3) of the price distribution, government interventions through guaranteed purchases and strategic reserves demonstrate dynamic effects: Short-term, Prevent sharp price declines. Long-term: Create downward pressure when releasing reserves. More aggressive support scenarios (e.g., 12% price supports) achieve greater stability but at significantly higher fiscal costs. While current policies have successfully stabilized Iran's wheat market, the study recommends policy revisions to better balance agricultural support with fiscal sustainability. Critical recommendations include precision targeting of support measures toward vulnerable farmers, Cost-based pricing that reflects actual production expenses advanced monitoring systems to track domestic and international market dynamics. The research concludes that data-driven, adaptive price support mechanisms are essential for simultaneously achieving food security objectives and safeguarding farmer welfare. Future simulations suggest that increasing the level of price support can further reduce price volatility, but this comes at a cost to the government. Notably, the 12% price support scenario significantly reduces volatility but imposes a substantial financial burden on the government budget. This highlights the need for a balance between supporting farmers and maintaining fiscal sustainability. Based on the study’s findings, it is recommended that price support policies be designed to maximize farmers’ welfare. This can be achieved by setting guaranteed prices aligned with production costs and regional conditions. Instead of relying solely on guaranteed prices, complementary tools such as crop insurance, low-interest loans, and technical training can help reduce dependence on direct price support.