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Inflation Theories and Inflation Persistence in Iran

Author

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  • Hamidreza Ghorbani Dastgerdi

    (Department of Economics, COMSATS University Islamabad, Lahore Campus, Lahore, Pakistan.)

Abstract

This study focuses on: (1) finding the causes of inflation which follows the inflation theories such as Demand-Pull, Cost-Push and Structural inflation.(2) measuring the degree of inflation persistence in order to evaluate the ability of monetary policies to control inflation. Engle- Granger test and the Autoregressive Distributed Lag are applied to analyze the response of inflation to its determinants. The Grid bootstrap Method and Impulse Response Functions measure the inflation persistence. The results suggest that controlling the money supply is a key factor in controlling inflation. The appreciation of Rial exchange rate is an important factor of low inflation. It is increased as a result of Budget deficit while decreased due to oil price and real GDP. Inflation persistence follows the structural changes and finally permanent shocks die out after some horizons. Therefore, monetary authorities control inflation but their policies are yet far from optimal level. JEL Classification: E3, E6

Suggested Citation

  • Hamidreza Ghorbani Dastgerdi, 2020. "Inflation Theories and Inflation Persistence in Iran," Zagreb International Review of Economics and Business, Faculty of Economics and Business, University of Zagreb, vol. 23(2), pages 1-20, November.
    • Handle: RePEc:zag:zirebs:v:23:y:2020:i:2:p:1-20
    DOI: 10.2478/zireb-2020-0011
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    More about this item

    Keywords

    inflation; inflation theories; inflation persistence;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

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