Investigating the price volatility spillover effects in the poultry industry inputs market and the egg market in Iran: using the multivariate DCC-GARCH model

Abstract

Abstract Background This paper investigates the effects of price volatility spillover in the poultry industry’s input markets, including soybean meal, day-old chicks and corn, and the foreign exchange market as an independent market, on the wholesale egg market in Iran. The experimental investigation is based on dynamic conditional correlation (GARCH-DCC). It is one of the most powerful and accepted methods for studying market volatility, whose representation is based on conditional variance. On the other hand, eggs are one of the main food items in the food basket of Iranian households, playing an important role in ensuring part of the food security of the country. However, the price volatilities of its inputs, which make up more than 70% of egg production costs, cause the instability of its price and the confusion of the producers of this sector. This is although in the relevant literature, there is little research on the issue of volatility spillover effects on agricultural product markets, especially in the country. Results The findings show that any shock in the input market leads to volatility and instability in the market; on the other hand, these volatilities maintain their stability. In addition, there is a spillover of exchange market volatility into corn and soybean meal input markets. Conclusions In that context, this article emphasizes the knowledge of market relationships and their consequences, thereby suggesting appropriate policies to control and support the domestic poultry industry.

Keywords

• Egg
• Food security
• Poultry industry’s input
• Price volatility spillover effects
• DCC-GARCH