Money and Inflation in the Islamic Republic of Iran

19 Pages Posted: 25 Jun 2007

See all articles by Leo Bonato

Leo Bonato

International Monetary Fund (IMF)

Date Written: May 2007

Abstract

This paper looks at the determinants of inflation in Iran. Unlike the traditional estimates of the demand function for real money balances, the approach followed here focuses on the relationship between nominal variables and inflation. The model estimates are used to address the questions raised by the decline in inflation that occurred up to the first half of 2006, looking at the structural stability of the estimated relationships and the ability of the model to predict inflation at the end of the sample. The estimates confirm the strong relationship between money and inflation when M1 is used, with no evidence of a structural change.

Suggested Citation

Bonato, Leo, Money and Inflation in the Islamic Republic of Iran (May 2007). IMF Working Paper No. 07/119, Available at SSRN: https://ssrn.com/abstract=995620

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