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How Fluctuations in Macroeconomic Indicators Affect Inflation in Iran

Author

Listed:
  • Tavakolian , Hossein

    (Faculty of Economics, Allameh Tabataba'i University)

  • Babaee , Majid

    (Faculty of Economics, Allameh Tabataba'i University)

  • Shakeri , Abbas

    (Faculty of Economics, Allameh Tabataba'i University)

Abstract

Given the effects of inflation on the decline of household welfare and its impact on production and investment, identifying the factors affecting it in order to adjust inflation and achieve price stability is necessary. Therefore, using the TVP-FAVAR model, which differentiates the fluctuations in factors affecting inflation, we try to identify the effects of different shocks such as liquidity, oil revenues, spot market exchange rates, economic growth, interest rates on bank facilities, budget deficits, inflation uncertainty and unemployment on inflation in Iran. In this study, seasonal data from 1370 to 1394 are used. The results, based on the TVP-FAVAR model, reflect the fact that all variables affecting inflation have a positive effect on this variable. Due to the negative effect of changes in economic growth on inflation rate, especially from 1388 to 1394, the existence of stagflation is confirmed. The shock caused by changes in oil revenues is also an important factor in creating inflation in the economy.

Suggested Citation

  • Tavakolian , Hossein & Babaee , Majid & Shakeri , Abbas, 2018. "How Fluctuations in Macroeconomic Indicators Affect Inflation in Iran," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 13(3), pages 267-289, July.
    • Handle: RePEc:mbr:jmonec:v:13:y:2018:i:3:p:267-289
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Inflation; Economic Growth; Stagflation; TVP-FAVAR;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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