Cover IMF Working Papers
Buy Book in Print
Determinants of Inflation in the Islamic Republic of Iran: A Macroeconomic Analysis
Author:
Mrs. O. Liu
Search for other papers by Mrs. O. Liu in
Current site
Google Scholar Close
and
Mr. Olumuyiwa S Adedeji
Search for other papers by Mr. Olumuyiwa S Adedeji in
Current site
Google Scholar Close
Series:
IMF Working Papers
Volume/Issue:
Volume 2000: Issue 127
Language:
English
Publication Date:
01 Jul 2000
DOI:
https://doi.org/10.5089/9781451854978.001
ISBN:
9781451854978
ISSN:
1018-5941
Pages:
28
Keywords:
WP; rate of inflation; money supply; market; market exchange rate; Iran; money demand; exchange rate; output gap; inflation and cointegration; TSE exchange market; equilibrium exchange rate; money growth; exchange rate elasticity; goods market; market-clearing price; Exchange rates; Multiple currency practices; Inflation; Demand for money; Global
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
Download PDF (756.2 KB) Download Epub
This study establishes a framework for analyzing the major determinants of inflation in the Islamic Republic of Iran. An empirical model was estimated by taking into consideration disequilibria in the markets for money, foreign exchange, and goods. Results strongly support the need for a sustained prudent monetary policy in order to reduce inflation and stabilize the foreign exchange market. The estimation shows that an excess money supply generates an increase in the rate of inflation that, in turn, intensifies asset substitution (from money to foreign exchange), thereby weakening real demand for money and exerting pressures on the foreign exchange market. The study also found that a permanent rise in real income tends to increase the real demand for money and reduces inflation in the long run.
  • Collapse
  • Expand
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund