Determinants of Inflation in Iran and Policies to Curb It
IMF Working Papers, September 9, 2022
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- Determinants of Inflation in Iran and Policies to Curb It
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Bibliographic details
- Authors: H. Elif Ture, Ali Reza Khazaei
- Published: September 9, 2022
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400220555.001
Overview and methodology
- Objective: Apply a vector error-correction model to study short- and long-term determinants of inflation in Iran and identify policy options to curb it.
- Data: Quarterly data spanning 2004-2021.
- Paper length: 35 pages.
Main empirical findings
- Money growth:
- Drives inflation only in the long term.
- Currency depreciation:
- Drives inflation in both the short- and the long term.
- Fiscal deficits:
- Drive inflation in both the short- and the long term.
- Sanctions (proxied by oil exports):
- Drive inflation in both the short- and the long term.
Policy implications and recommendations
- Sanctions removal scenario:
- A removal of US trade and financial sanctions could significantly boost the rial, which would affect inflation dynamics.
- Fiscal policy:
- In the absence of sanctions removal, budget deficits will have to be adjusted to contain inflation, albeit gradually to avoid hindering the recovery.
- Monetary policy and institutional framework:
- Over the medium term, strengthening the inflation targeting framework could help improve monetary transmission and contain inflation durably.
Thematic keywords and subject areas (as listed)
- Foreign exchange
- Government debt management
- Inflation
- International trade
- Nominal effective exchange rate
- Oil exports
- Oil prices
- Prices
- Public financial management (PFM)
IMF Working Paper by H. Elif Ture and Ali Reza Khazaei, September 9, 2022.
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