The Asymmetric Effects of Monetary Policy, Currency Crises and Oil Price on Food Inflation in Iran: An Application of Quantile Regression

Since the food component has a large weight in the CPI basket and food inflation plays one of the main roles in determining the headline inflation in Iran, this paper looks at connections between monetary policy, currency crisis, sanction and food price. To examine the dynamics and asymmetric effects of these relationships, we employ quantile regression. Empirically, we show that the coefficients of monetary policy, exchange rate and currency crisis on the food prices in different quantiles are positive and significant. In most cases, we show that food prices in Iran are responsive to the price of oil.More importantly, the inflation of food is strongly linked to economic sanctions, and the effect is significant across all quantiles. To verify robustness, the food price model was estimated using ARDL model as an alternative. The present study came up with the same results when compared to quantile regression. Eventually, asymmetric effects at different quantiles were confirmed.