IDEAS home Printed from https://ideas.repec.org/a/bpj/rmeecf/v2y2004i2n2.html
   My bibliography  Save this article

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

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: https://doi.org/10.2202/1475-3693.1023
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.
    File URL: https://libkey.io/10.2202/1475-3693.1023?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Mazarei, Adnan, Jr, 1996. "The Iranian Economy under the Islamic Republic: Institutional Change and Macroeconomic Performance (1979-1990)," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 20(3), pages 289-314, May.
    2. Cochrane, John H, 1988. "How Big Is the Random Walk in GNP?," Journal of Political Economy, University of Chicago Press, vol. 96(5), pages 893-920, October.
    3. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November.
    4. Bahmani-Oskooee, Mohsen, 1996. "The black market exchange rate and demand for money in Iran," Journal of Macroeconomics, Elsevier, vol. 18(1), pages 171-176.
    5. Lucas, Robert E, Jr, 1973. "Some International Evidence on Output-Inflation Tradeoffs," American Economic Review, American Economic Association, vol. 63(3), pages 326-334, June.
    6. Pesaran, M. H., 1998. "Economic Trends and Macroeconomic Policies in Post-revolutionary Iran," Cambridge Working Papers in Economics 9818, Faculty of Economics, University of Cambridge.
    7. Mr. 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 1999/082, International Monetary Fund.
    8. Perron, Pierre, 1997. "Further evidence on breaking trend functions in macroeconomic variables," Journal of Econometrics, Elsevier, vol. 80(2), pages 355-385, October.
    9. Pierre Perron, 1994. "Trend, Unit Root and Structural Change in Macroeconomic Time Series," Palgrave Macmillan Books, in: B. Bhaskara Rao (ed.), Cointegration, chapter 4, pages 113-146, Palgrave Macmillan.
    10. Mrs. O. Liu & Mr. Olumuyiwa S Adedeji, 2000. "Determinants of Inflation in the Islamic Republic of Iran: A Macroeconomic Analysis," IMF Working Papers 2000/127, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Carrera, Jorge Eduardo & Feliz, Mariano & Panigo, Demian, 2003. "Testing the Order of Integration with Low Power Tests. An Application to Argentine Macro-variables," Journal of Applied Economics, Universidad del CEMA, vol. 6(2), pages 1-26, November.
    2. Perron, Pierre & Wada, Tatsuma, 2016. "Measuring business cycles with structural breaks and outliers: Applications to international data," Research in Economics, Elsevier, vol. 70(2), pages 281-303.
    3. Brittle, Shane, 2009. "Ricardian Equivalence and the Efficacy of Fiscal Policy in Australia," Economics Working Papers wp09-10, School of Economics, University of Wollongong, NSW, Australia.
    4. Devi, P. Indira & Shanmugam, K.R. & Jayasree, M.G., 2012. "Compensating Wages for Occupational Risks of Farm Workers in India," Indian Journal of Agricultural Economics, Indian Society of Agricultural Economics, vol. 67(2), pages 1-12.
    5. Tatsuma Wada & Pierre Perron, 2006. "State Space Model with Mixtures of Normals: Specifications and Applications to International Data," Boston University - Department of Economics - Working Papers Series WP2006-029, Boston University - Department of Economics.
    6. Pahlavani, Mosayeb, 2005. "Analysing the Trade-GDP Nexus in Iran: A Bounds Testing Approach," Economics Working Papers wp05-25, School of Economics, University of Wollongong, NSW, Australia.
    7. Shyh-Wei Chen, 2008. "Are 19 Developed Countries' Real Per Capita GDP levels Non-stationary? A Revisit," Economics Bulletin, AccessEcon, vol. 3(2), pages 1-11.
    8. Jorge Eduardo Carrera & Mariano Féliz & Demian Tupac Panigo, 2000. "Raíces unitarias y ciclos en las principales variables macroeconómicas de argentina," Department of Economics, Working Papers 020, Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata.
    9. Jushan Bai & Pierre Perron, 2003. "Computation and analysis of multiple structural change models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(1), pages 1-22.
    10. António Portugal Duarte & João Sousa Andrade & Adelaide Duarte, 2009. "Exchange Rate Mean Reversion within a Target Zone: Evidence from a Country on the Periphery of the ERM," GEMF Working Papers 2009-15, GEMF, Faculty of Economics, University of Coimbra.
    11. Ocampo, José Antonio & Parra, María Angela, 2003. "The terms of trade for commodities in the twentieth century," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), April.
    12. Paulo M. M. Rodrigues, 2013. "Recursive adjustment, unit root tests and structural breaks," Journal of Time Series Analysis, Wiley Blackwell, vol. 34(1), pages 62-82, January.
    13. Luis Eduardo Arango Thomas, 1998. "Some univariate time series properties of output," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 49, pages 7-46, Julio Dic.
    14. Perron, Pierre & Rodriguez, Gabriel, 2003. "GLS detrending, efficient unit root tests and structural change," Journal of Econometrics, Elsevier, vol. 115(1), pages 1-27, July.
    15. Caporale, Guglielmo Maria & Hassapis, Christis & Pittis, Nikitas, 1998. "Unit roots and long-run causality: investigating the relationship between output, money and interest rates," Economic Modelling, Elsevier, vol. 15(1), pages 91-112, January.
    16. Nelson, Charles R & Piger, Jeremy & Zivot, Eric, 2001. "Markov Regime Switching and Unit-Root Tests," Journal of Business & Economic Statistics, American Statistical Association, vol. 19(4), pages 404-415, October.
    17. Brodsky, Boris, 2008. "Structural Changes and Unit Roots: Distinguishing Models of Nonstationary Time Series," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 11(3), pages 52-63.
    18. Christophe Andre & Mehmet Balcilar & Tsangyao Chang & Luis Alberiko Gil-Alana & Rangan Gupta, 2018. "Current account sustainability in G7 and BRICS: Evidence from a long-memory model with structural breaks," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 27(6), pages 638-654, August.
    19. repec:ebl:ecbull:v:3:y:2008:i:2:p:1-11 is not listed on IDEAS
    20. Tatsuma Wada & Pierre Perron, 2005. "An Alternative Trend-Cycle Decomposition using a State Space Model with Mixtures of Normals: Specifications and Applications to International Data," Boston University - Department of Economics - Working Papers Series WP2005-44, Boston University - Department of Economics.
    21. Li, Xiao-Ming, 2000. "The Great Leap Forward, Economic Reforms, and the Unit Root Hypothesis: Testing for Breaking Trend Functions in China's GDP Data," Journal of Comparative Economics, Elsevier, vol. 28(4), pages 814-827, December.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bpj:rmeecf:v:2:y:2004:i:2:n:2. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.degruyter.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.