Estimating Iranian Wheat Market (A Comparative Study between ARDL and SUR)

Abstract

In this study with estimating the econometric pattern of wheat, the affecting element in supply, product, import and consumption can be recognized. Auto regressive distributed lag (ARDL) and seemingly unrelated regressions (SUR) have been used for getting the following results: Price elasticity of demand for wheat is 2/29 and the cross price elasticity of demand between wheat and barley is 1/49. Production function showed that with increasing the area under harvested with 1 percent, the amount of production will increase 0/68 percent. Fertilizer has direct effect in the amount of production in next year. Results of consumption model show that consumption income element in demand model is a small number with positive sign but it is not meaningful. The results of demand elasticity of bread showed that this factor is 0/156. It means that the demand for bread is not very responsive to changes in price. Although results showed increasing the consumption per capita of rice with 1 percent will decrease the consumption per capita of wheat with 0/23 percent. Import model shows that increasing the amount of gross domestic production with 1 percent will increase the amount of demand with 1/1 percent. In this estimation, the coefficient of the price ratios is positive and is opposite the ordinary cases. It is because of the responsibility of government in importing wheat and this activity doesn’t relate to domestic price and is related to domestic needs.