Common Trends and Structural Change: A Dynamic Macro Model for the Pre- and Postrevolution Islamic Republic of Iran

Author/Editor:

Torbjorn I. Becker

Publication Date:

June 1, 1999

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper uses a common trends model to study how prices, the black market exchange rate, money, and real output have developed over a period covering both pre- and post-revolution Iranian data. It is shown that monetary shocks have significant short-run effects on output, but permanent effects on the price level and exchange rate, that is, expansionary monetary policy is not consistent with achieving low inflation or a stable unified exchange rate. The real shocks generate higher growth and lower inflation, suggesting that supply-side policies are consistent with the goals in the Islamic Republic of Iran’s second five-year development plan.

Series:

Working Paper No. 1999/082

Subject:

Demand for money Exchange rates Foreign exchange Inflation Money Prices Purchasing power parity

English

Publication Date:

June 1, 1999

ISBN/ISSN:

9781451850420/1018-5941

Stock No:

WPIEA0821999

Pages:

30

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