The Relative Contribution of Macroeconomic Shocks to Inflation Volatility in Iran: Evidence from a Dynamic Stochastic General Equilibrium Model with an Interest-Rate Corridor Mechanism (in Persian)

This study quantifies the relative importance of the main categories of macroeconomic shocks in explaining Iranian inflation over 1989:Q2 – 2025:Q1. A small-open-economy dynamic stochastic general-equilibrium (DSGE) model is estimated that identifies four structural disturbances-supply-side, aggregate-demand, monetary-policy shocks, and shocks to household wealth driven by equity-market fluctuations -while embedding the institutional features of Iran’s dual monetary–exchange-rate framework. Forecast-error-variance decompositions show that supply shocks account for 55 percent of one-quarter-ahead inflation volatility, rising to 63 percent at the one-year horizon. Demand shocks explain 22 percent in the short run and less than 15 percent in the longer run, whereas the contribution of monetary-policy shocks declines from 18 percent (one quarter) to roughly 10 percent (three years). Asset-wealth shocks related to the equity market never exceed 5 percent. Two episodes—2011-2013 and 2018 onward—when oil-export constraints and sharp currency depreciations coincided, register the highest supply-side shares. The results imply that achieving durable single-digit inflation in Iran is unlikely without a credible foreign-exchange buffer and a rehabilitated banking sector, because supply-driven shocks quickly propagate to consumer prices through the exchange-rate and cost-push channels.