Sources of Inflation in Iran: An application of the ARDL Approach
AbstractThis paper examines the major determinants of inflation in Iran using annual time series data (1971 to 2006) by applying the ARDL approach. Taking into account the special characteristics of Iran’s economy and by considering recent empirical studies in the context of inflation, an empirical model has been constructed which emphasizes the effects of liquidity, the exchange rate, GDP, the expected rate of inflation and imported inflation factors along with the dummy variable presenting the effect of Iran/Iraq war on Iran’s economy. The empirical results show that in the long-run, the main determinants of inflation in Iran are liquidity, the exchange rate, the rate of expected inflation and the rate of imported inflation. All these variables had significant effects on the inflation rate in the short run. Moreover the destructive eight year war with Iraq had a positive effect on the inflation rate in the Iranian economy. Finally, the error correction term (-0.3995) is found to be negative and statistically significant suggesting a quick adjustment process.
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Bibliographic InfoArticle provided by Euro-American Association of Economic Development in its journal International Journal of Applied Econometrics and Quantitative Studies .
Volume (Year): 9 (2009)
Issue (Month): 1 ()
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Web page: http://www.usc.es/economet/eaa.htm
Find related papers by JEL classification:
- B23 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Econometrics; Quantitative and Mathematical Studies
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
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