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Deficits, Debt Financing, Monetary Policy and Inflation in Developing Countries: Internal or External Factors? Evidence from Iran

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Author Info
Amir Kia () (Department of Economics, Carleton University)
Abstract

This paper focuses on internal and external factors, which influence the inflation rate in developing countries. A monetary model of inflation rate, capable of incorporating both monetary and fiscal policies as well as other internal and external factors, was developed and tested on Iranian data. It was found that, over the long run, a higher exchange rate leads to a higher price and that the fiscal policy is very effective to fight inflation. The major factors affecting inflation in Iran, over the long run, are internal rather than external. However, over the short run, the sources of inflation are both external and internal.

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Paper provided by Carleton University, Department of Economics in its series Carleton Economic Papers with number 06-03.

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Length: 50 pages
Date of creation: 15 Mar 2006
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Publication status: Published: Carleton Economic Paper
Handle: RePEc:car:carecp:06-03

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Related research
Keywords: Demand for money inflation fiscal and monetary policies external and internal factors

Find related papers by JEL classification:
E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy

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