Money and Inflation in the Islamic Republic of Iran

Bonato, Leo

doi:10.2202/1475-3693.1051

Cited by 17 publications

(11 citation statements)

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“…While all the papers discussed so far have made use of annual data, there are a few IMF working papers on Iran using quarterly data. In particular, Bonato (2008) looks at the determinants of in ‡ation in Iran, Celasun and Goswami (2002) develop an econometric model of short run in ‡ation and long run money demand dynamics in Iran, and Liu and Adedeji (2000) construct a model to develop the determinants of in ‡ation in Iran. However, all of the papers using quarterly data focus on a certain aspect of the Iranian economy, for instance the money demand relation or the determination of in ‡ation, and as such do not consider the interconnection of the domestic variables with that of foreign variables.…”

Section: Error-correcting Equationsmentioning

confidence: 99%

Oil exports and the Iranian economy

Esfahani

Mohaddes

Pesaran

2013

The Quarterly Review of Economics and Finance

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This paper develops a long run growth model for a major oil exporting economy and derives conditions under which oil revenues are likely to have a lasting impact. This approach contrasts with the standard literature on the "Dutch disease" and the "resource curse", which primarily focus on short run implications of a temporary resource discovery. Under certain regularity conditions and assuming a Cobb Douglas production function, it is shown that (log) oil exports enter the long run output equation with a coe¢ cient equal to the share of capital. The long run theory is tested using a new quarterly data set on the Iranain economy over the period 1979Q1-2006Q4. Building an error correction speci…cation in real output, real money balances, in ‡ation, real exchange rate, oil exports, and foreign real output, the paper …nds clear evidence for two long run relations: an output equation as predicted by the theory and a standard real money demand equation with in ‡ation acting as a proxy for the (missing) market interest rate. Real output in the long run is shaped by oil exports through their impact on capital accumulation, and the foreign output as the main channel of technological transfer. The results also show a signi…cant negative long run association between in ‡ation and real GDP, which is suggestive of economic ine¢ ciencies. Once the e¤ects of oil exports are taken into account, the estimates support output growth convergence between Iran and the rest of the world. We also …nd that the Iranian economy adjusts quite quickly to the shocks in foreign output and oil exports, which could be partly due to the relatively underdeveloped nature of Iran's …nancial markets.

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Section: Error-correcting Equationsmentioning

confidence: 99%

Oil exports and the Iranian economy

Esfahani

Mohaddes

Pesaran

2013

The Quarterly Review of Economics and Finance

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“…Focusing on the literature relevant to the case of Egypt, Kandil and Morsy (2011) and Hasan and Alogeel (2008) study the short and long-run determinants of in°ation in the Gulf Cooperation Council (GCC) countries. Other studies on in°ation dynamics in Middle Eastern countries include Almounsor (2010) for the case of Yemen, and Bonato (2007) for the Islamic Republic of Iran. Domac and Yucel (2004) and Loungani and Swagel (2001) study the sources of in°ation for emerging and developing economies, respectively.…”

Section: Literature Review and An Initial Look At The Datamentioning

confidence: 99%

Inflation in Egypt: Internal or External Driven?

Hosny

2013

Middle East Development Journal

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This paper investigates whether internal or external factors explain in°ation in Egypt over the period 2003M1-2012M12. Using an autoregressive distributed lag model, results indicate that money supply and global commodity prices a®ect in°ation in the long-run, while important short-run factors are in°ation persistence, exchange rate depreciation and supply side bottlenecks. It is also shown that global commodity prices, especially energy prices, pass-through into headline in°ation in Egypt with a short lag. These results take into account the di®erent stationary characteristics of di®erent time series variables and are robust to di®erent model speci¯cations. Policy recommendations include the necessity of reforming the government's energy subsidy bill, less monetization of the de¯cit and gradual liberalization of the currency in order to curb in°ationary pressures in Egypt and put the economy on a more sustainable path.

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“…Most studies find a significant role for monetary factors. By focusing directly on the relationship between nominal variables and inflation, Bonato (2008) identifies a long-run relationship between the price level and money, the interest rate, real output, and the exchange rate. Money is found to have a prominent role in driving inflation both in the long and the short run.…”

mentioning

confidence: 99%

“…• Monetary model. Bonato (2008) estimates an error-correction model of inflation as a function of changes in money, interest rate, real output, and exchange rate. In the presence of structural change, however, the long-term cointegrating restriction may become an important source of forecast error (Clements and Hendry, 2006).…”

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confidence: 99%