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Government policies in managing food price anomalies: Evidence from Iran

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  • Shabanzadeh-Khoshrody, Mehdi
  • Ahangarkolaee, Saeed Shahabi
  • Javdan, Ebrahim
  • Kenari, Reza Esfanjari

Abstract

Food price volatility presents a persistent policy challenge for resource-dependent economies, particularly during periods of global shocks and country-specific external pressures, such as international sanctions in the case of Iran. This study examines the effectiveness of two major policy instruments -exchange rate management and monetary policy- in mitigating food price anomalies in Iran. Using seasonal data from 2004 to 2022 and employing the Autoregressive Distributed Lag (ARDL) model, the research identifies the key drivers of food price anomalies and evaluates the relative and joint impact of exchange rate depreciation and money supply growth. Results show that the most severe anomalies coincided with global crises (2007–2008, 2011, 2020, 2022) and intensified sanctions (2011–2012, 2018). Exchange rate depreciation and expansionary monetary policy significantly increased anomalies in both the short and long run, while higher import volumes helped dampen price fluctuations. Notably, monetary policy exhibited the strongest and most persistent effect. The error correction mechanism indicates a slow adjustment process, suggesting long-lasting impacts of shocks. The study recommends greater coordination between monetary and exchange rate policies, along with fiscal discipline, exchange rate unification, subsidy reforms, inflation-aligned interest rates, and strengthened strategic reserves to enhance resilience in Iran’s food market.

Suggested Citation

  • Shabanzadeh-Khoshrody, Mehdi & Ahangarkolaee, Saeed Shahabi & Javdan, Ebrahim & Kenari, Reza Esfanjari, 2026. "Government policies in managing food price anomalies: Evidence from Iran," Journal of Policy Modeling, Elsevier, vol. 48(1), pages 73-88.
    • Handle: RePEc:eee:jpolmo:v:48:y:2026:i:1:p:73-88
    DOI: 10.1016/j.jpolmod.2025.05.006
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    Keywords

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    JEL classification:

    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade
    • B23 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Econometrics; Quantitative and Mathematical Studies

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