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:: Volume 10, Issue 2 (Spring 2015) ::
J. Mon. Ec. 2015, 10(2): 45-69 Back to browse issues page
The Impact of Exchange Rate Misalignment on the Persistence of Inflation in Iran
Esmat Masoumi1, Amir Mansor Tehranchian 1
1- University of Mazandaran
Abstract:   (3273 Views)

The purpose of this study is to investigate the impact of exchange rate misalignment on inflation persistence. For this purpose, Vector Auto Regression method and Markov Switching model is used for quarterly data during 1989:4 -2014:3. The results show that, the impact of liquidity growth and exchange rate misalignment on inflation persistence is positive. On the other hand, GDP growth has a negative effect on inflation persistence. By Markov Switching model the nonlinear relationship between variables was investigated; based on Markov Switching model, quarterly inflationary environment (inflation regime) were extracted for economy of Iran, and the results show three different regimes for quarterly inflation. Markov model findings are consistent with VAR model findings. Results also show that, the impact of exchange rate misalignment on stable inflation regime is positive and the impact of exchange rate misalignment on unstable inflation regime is negative.

JEL Classifications: F31, E3, D31, C22, H5

Keywords: Inflation persistence, Exchange rate misalignment, Economy of Iran, Vector Auto Regressive model, Markov Switching model
Full-Text [PDF 724 kb]   (1951 Downloads)    
Type of Study: Original Research - Theoric | Subject: Monetary Economics
Received: 11 Dec 2015 | Accepted: 22 Oct 2016 | Published: 22 Oct 2016
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Masoumi E, Tehranchian A M. The Impact of Exchange Rate Misalignment on the Persistence of Inflation in Iran. J. Mon. Ec.. 2015; 10 (2) :45-69
URL: http://jme.mbri.ac.ir/article-1-154-en.html


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Volume 10, Issue 2 (Spring 2015) Back to browse issues page
Journal of Money and Economy Journal of Money And Economy
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