Transmission of International Prices of Corn to Iranian Domestic Markets

Market volatility remains one of the most important research fields in agricultural economics.Interestingly, price transmission mechanism seems to be symmetric in sectors that are likely to be of high political power.This paper analyzes the price transmission effects from international markets to domestic markets for corn in Iran. For this purpose, we estimate the elasticity of substitution between imported and domestically produced goods. Annual data (1996-2012) are analyzed with an econometric framework based on the Maximum Entropy. The result shows that there is a substitution relationship between imported and domestic corn and in the end; domestic prices areaffected from world price more than the short run.