Inflation and Gap between Official and Market Exchange Rates in Iran

Interdisciplinary Journal of Contemporary Research in Business, Vol. 5, No. 4, August 2013

17 Pages Posted: 22 Apr 2014

See all articles by Hamidreza Ghorbani Dastgerdi

Hamidreza Ghorbani Dastgerdi

University of Malaya; University of Malaya (UM) - Faculty of Economics & Administration (FEA)

Zarinah Yusof

University of Malaya (UM) - Faculty of Economics & Administration (FEA)

Date Written: August 3, 2013

Abstract

Although governments stabilized different exchange rate regimes with respect to their conditions, they have rarely experienced two different of exchanges rates such as official and market exchange rates at a same time. It was experienced in Iran’s economy in 1977-2002 and it made Iran’s economy different from others somewhat. Therefore, this study is an effort to analyze the effect of the gap between official and market exchanges on inflation in Iran.

Two methods were applied in this study and the results are: First, by using IRF in a monetary model augmented, it clears that gap between exchange rates increases inflation sharply in the short time and this positive effect has remained in the long run. It shows that any increase of gap between official and market exchange rates would boost inflation more. Furthermore, this is one of the preconditions to apply the VECM model while existence of the long run cointegration vector, as the second precondition,does not confirm by cointegration Tests. Therefore the VECM is unable to estimate coefficients.

Keywords: Inflation, the gap between official and market exchanges, IRF, VECM

Suggested Citation

Ghorbani Dastgerdi, Hamidreza and Yusof, Zarinah, Inflation and Gap between Official and Market Exchange Rates in Iran (August 3, 2013). Interdisciplinary Journal of Contemporary Research in Business, Vol. 5, No. 4, August 2013, Available at SSRN: https://ssrn.com/abstract=2427245

Hamidreza Ghorbani Dastgerdi

University of Malaya ( email )

University of Malaya
Kuala Lumpur, Wilayah Persekutuan 50603
Malaysia

University of Malaya (UM) - Faculty of Economics & Administration (FEA) ( email )

University of Malaya
Kuala Lumpur, Wilayah Persekutuan 50603
Malaysia

Zarinah Yusof (Contact Author)

University of Malaya (UM) - Faculty of Economics & Administration (FEA) ( email )

University of Malaya
Kuala Lumpur, Wilayah Persekutuan 50603
Malaysia

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
75
Abstract Views
439
Rank
576,227
PlumX Metrics