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The Inflationary Impact of Energy Subsidy Reform in Iran

Author

Listed:
  • Mirshojaeian Hosseini , Hossein

    (Faculty of Economics, University of Tehran)

  • Majed , Vahid

    (Faculty of Economics, University of Tehran)

  • Kaneko , Shinji

    (Graduate School for International Development and Cooperation, Hiroshima University)

Abstract

Iran has suffered ever-increasing domestic energy consumption, mostly because of its long-standing price control policy. To decelerate this trend, Iran began a reform on its energy subsidy system in December 2010. This paper examines the inflationary impact of the energy subsidy reform on different Iranian non-energy sectors and urban and rural households by making an updated input-output price model and deriving the energy price elasticities (the percentage change in price of non-energy sectors in response to a one percent change in price of energy carriers). The results show that full reform (increasing the domestic energy prices immediately to average regional market prices) would increase consumption prices by 54.1% that impresses the expenditures of urban households more. In addition, the manufacture of non-metallic mineral products, basic metal industries, and transport, storage and communication sectors would experience the largest increase in production prices. Finally, electricity, natural gas and gasoline have the largest impact on production prices.

Suggested Citation

  • Mirshojaeian Hosseini , Hossein & Majed , Vahid & Kaneko , Shinji, 2014. "The Inflationary Impact of Energy Subsidy Reform in Iran," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 9(2), pages 64-85, October.
    • Handle: RePEc:mbr:jmonec:v:9:y:2014:i:2:p:64-85
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Energy subsidy reform; Input-output price model; Iran; Production and consumption prices;
    All these keywords.

    JEL classification:

    • A11 - General Economics and Teaching - - General Economics - - - Role of Economics; Role of Economists
    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue

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