The Effect of Monetary and Financial Policies on Iran's Food Security
2024
Toktam Mohtashami | Mohaddeseh Tavakoli
Using appropriate policies to overcome food insecurity is one of the pillars of economic prosperity of countries. Economic decisions that change macroeconomic parameters can directly or indirectly affect food production and prices and affect food security. Therefore, achieving a clear understanding of how macroeconomic policies affect different dimensions of food security in the country can lead to providing solutions to improve the food security index. In this study, a framework of simultaneous equations is presented in order to investigate the relationship between monetary and financial policies with food production and prices in the country. In this regard, using the method of generalized moments, behavioral equations were estimated separately using the data of 1978-2018. The model was then implemented as a system of equations using the Gauss Seidel method. Different scenarios were simulated in this model to investigate the effects of changes in interest rates, money volume, and general government investment on various aspects of food security. The results indicated that government investment in the agriculture sector and public investment expenditures have a positive impact on food production through capital stock. Additionally, changes in interest rates have minimal effects on food production but significant negative effects on food prices. Overall, monetary policy decisions result in increased food prices alongside decreased food production due to the demand for money and private investment. Therefore, the implementation of these policies should be done more carefully in order to encourage farmers to increase production and therefore ensure food security for consumers.
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