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Given the large weight of food in the households’ consumption basket and its limited substitutability with other goods, food price fluctuations are of sizeable impacts on overall consumer prices. The reaction of the food prices to monetary shocks has been the subject of much empirical researches in the recent years. This study examines the impact of monetary shocks on food prices in Iran. To do this, the study adopts Johansen-Juselius and Error-Correction models using time-series data over the period 1973-2008. Using Hodrick-Prescott filter, the monetary shocks were obtained. The results showed that in the long-run positive monetary shocks have significant effects on food prices in Iran. Therefore, policies and strategies should be such that minimize the negative effects of monetary shocks on the food prices. 

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The issue of asymmetric effects of monetary shocks on the economy is among the new topics that have been studied by the New Keynesians. How to monetary shocks affect macroeconomic variables such as gross domestic product (GDP), prices, private investment in terms of nominal and real sectors, and economic policy-making is of great importance. In this study, according to the New-Keynesian assumptions, the effects of asymmetry in monetary shocks are examined using dynamic stochastic general equilibrium model in Iran's economy during 1979-2012. The results indicate that positive and negative monetary shocks are endogenous and depend on inflationary regimes in the Iranian economy, so that the effects of positive and negative shocks on GDP and private investment in the low inflation regime are more than those of high inflation regime. In addition, the effects of positive and negative shocks on the general prices' level in the high inflation regime are higher than those of low inflation regime.