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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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    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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    File URL: http://www1.carleton.ca/economics/ccms/wp-content/ccms-files/cep06-03.pdf
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    Bibliographic Info

    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
    Date of revision: Nov 2006
    Publication status: Published: Revised version in Journal of Asian Economics, Vol. 17, No. 5 (November 2006), pp. 879–903
    Handle: RePEc:car:carecp:06-03

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

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