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The Political Economy of Growth-Inflation Transmission: The Case of Iran

Author

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  • Khashadourian Edmund

    (University of Phoenix)

  • Grammy Abbas P

    (Department of Economics, California State University)

Abstract

After detrending Iran’s growth rates into stochastic and deterministic components and by decomposing nominal shocks into inflation and real output growth, 80% of the demand side shocks are found to be absorbed by price increases. This finding would cast doubt on the compatibility between inflation and growth targets outlined in the third five-year economic plan of the country. The simulation results here suggest that if the plan were constrained to a 6% real growth target, Iran’s chronic double-digit inflation rate would further accelerate. Hence, expansionary policies aiming at achieving the plan’s targets would move the economy along a near-vertical line Phillips curve.

Suggested Citation

  • 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.
    • Handle: RePEc:bpj:rmeecf:v:2:y:2004:i:2:n:2
    DOI: 10.2202/1475-3693.1023
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    References listed on IDEAS

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