Paper Titles in Periodical
International Letters of Social and Humanistic Sciences
Volume 43
Subscribe

Subscribe to our Newsletter and get informed about new publication regulary and special discounts for subscribers!

ILSHS > Volume 43 > Determinants of Inflation in Iran Based on...
< Back to Volume

Determinants of Inflation in Iran Based on Bayesian Model Averaging (BMA)

Full Text PDF

Abstract:

Due to the important influence of inflation on macro-economic variables, researchers pay tremendous amount of attention to its determinants. Accordingly, in the following research, the impact of 13 variables on inflation during the period of 1338-1391 by using Bayesian Model Averaging (BMA) method has been investigated for Iran economy. The ranking of the 13 explanatory variables are obtained based on the probability of their inclusion in model. The results show that the energy price and money imbalance (lagged ratio of money to nominal output) have expected and positive effect on inflation rate with a probability of 100 % and they are considered as the key explanatory variables in inflation equation. The energy price, money imbalance, money growth and market exchange rate growth have the first to fourth rank respectively. The influence of the production growth is not significant on the inflation in the short-run but it gradually influences the inflation through money imbalance channel in the long-run. In addition, most of the disinflation effects due to decrease in money supply will appear with delay. These results imply the dominance of monetary variables on inflation with cost push factors not having important impacts on prices. Also, oil revenue and imports influence the inflation through exchange rate channel, production and money velocity.

Info:

Periodical:
International Letters of Social and Humanistic Sciences (Volume 43)
Pages:
10-17
Citation:
M. Mehrara et al., "Determinants of Inflation in Iran Based on Bayesian Model Averaging (BMA)", International Letters of Social and Humanistic Sciences, Vol. 43, pp. 10-17, 2015
Online since:
November 2014
Export:
Distribution:
References:

[1] Adusei, M. (2013)‏. Is Inflation in South Africa a Structural or Monetary Phenomenon?. British Journal of Economics. Management & Trade 3(1); 60-72.

DOI: https://doi.org/10.9734/bjemt/2013/2553

[2] Altowaijri, H & A (2009). ‏. External and Internal Determinants of Inflation: A Case study of Saudi Arabia. Middle East Journal of Economics and Finance 2(1), 25-38.

[3] Danilov, D., Magnus, J. R (2004). On the harm that ignoring pretesting can cause. Journal of Econometrics 122(5), 27-46.

DOI: https://doi.org/10.1016/j.jeconom.2003.10.018

[4] Feldere, B. & Hamburg, S. (1920). Macroeconomics. Berlin: Springer-Verlage.

[5] Fern´andez, C., E. Ley, and M. F. J. Steel (2001). Model uncertainty in cross-country growth regressions. Journal of Applied Econometrics 16(3), 563-576.

DOI: https://doi.org/10.1002/jae.623

[6] Friedman, M (1970). The counter-revolution in monetary theory; London, p.24.

[7] Hagger, A. (1977). Inflation, Theory and Policy (First Ed). London: Macmillan press.

[8] Koop, Gary (2003). Bayesian Econometrics. John Wiley & Sons Ltd, England.

[9] Lindsey C., Sheather S. (2010). Variable selection in linear regression. The Stata Journal 10(4), 650-669.

[10] Liu O‏., Olumuyiwa S. Adedji, Determinants of inflation in Islamic Republic of Iran. IMF Working Paper, wp/00/127.

[11] Loungani, P‏., Swagel, P Sources of inflation in Developing Countries ,. IMF Working Paper, wp/01/19.

[12] Lucas, R. E. J (1973). Some international evidence on output-inflation trade -offs. American Economic Review 63(3), 326-334.

[13] Magnus, J. R., O. Powell &P. Prufer( 2010). A comparison of two model averaging techniques with an application to growth empirics. Journal of Econometrics 154(5), 139-153.

DOI: https://doi.org/10.1016/j.jeconom.2009.07.004

[14] Magnus, J.R. & Wang, W. (2012) Concept-Based Bayesian Model Averaging and Growth Empirics. Center Discussion Paper Series No. 20122-017.

[15] Masanjala, W., Papageorgiou, C. (2008). Rough and lonely road to prosperity: A reexamination of the sources of growth in Africa using Bayesian model averaging. Journal of Applied Econometrics 23(7), 671-682.

DOI: https://doi.org/10.1002/jae.1020

[16] Poirier, D. (1995) Intermediate Statistics and Econometrics: A Comparative Approach. Cambridge: The MIT Press.

[17] Raftery, A.E. (1995). Bayesian model selection in social research. Sociological Methodology, 25(4), 111-163.

DOI: https://doi.org/10.2307/271063

[18] Sargent, T. J. & Wallace, N. (1975). Rational Expectations, the Optimal Monetary Instrument and the Optimal Money Supply Rule. Journal of Political Economy, 83(2), 241-254.

DOI: https://doi.org/10.1086/260321

[19] Zellner, A. (1986).

Show More Hide
Cited By:
This article has no citations.