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Common Trends and Structural Change; A Dynamic Macro Model for the Pre- and Postrevolution Islamic Republic of Iran

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  • Torbjorn I. Becker

Abstract

This paper uses a common trends model to study how prices, the black market exchange rate, money, and real output have developed over a period covering both pre- and post-revolution Iranian data. It is shown that monetary shocks have significant short-run effects on output, but permanent effects on the price level and exchange rate, that is, expansionary monetary policy is not consistent with achieving low inflation or a stable unified exchange rate. The real shocks generate higher growth and lower inflation, suggesting that supply-side policies are consistent with the goals in the Islamic Republic of Iran’s second five-year development plan.

Suggested Citation

  • Torbjorn I. Becker, 1999. "Common Trends and Structural Change; A Dynamic Macro Model for the Pre- and Postrevolution Islamic Republic of Iran," IMF Working Papers 99/82, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:99/82
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    Cited by:

    1. Esfahani, Hadi Salehi & Mohaddes, Kamiar & Pesaran, M. Hashem, 2013. "Oil exports and the Iranian economy," The Quarterly Review of Economics and Finance, Elsevier, vol. 53(3), pages 221-237.
    2. Khashadourian Edmund & Grammy Abbas P, 2004. "The Political Economy of Growth-Inflation Transmission: The Case of Iran," Review of Middle East Economics and Finance, De Gruyter, vol. 2(2), pages 22-34, August.
    3. Dizaji, S.F., 2011. "Analysis of domestic price and inflation determinants in Iran (as a developing oil-export based economy)," ISS Working Papers - General Series 530, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.

    More about this item

    Keywords

    Inflation; Iran; Islamic Republic of; output; exchange rate; real and nominal shocks; cointegration; price level; money demand; aggregate demand; money stock;

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