Deficits, Debt Financing, Monetary Policy and Inflation in Developing Countries: Internal or External Factors? Evidence from Iran

Amir Kia ()
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Amir Kia: Department of Finance and Economics, Utah Valley University

No 06-03, Carleton Economic Papers from Carleton University, Department of Economics

Abstract: This paper focuses on internal and external factors, which influence the inflation rate in developing countries. A monetary model of inflation rate, capable of incorporating both monetary and fiscal policies as well as other internal and external factors, was developed and tested on Iranian data. It was found that, over the long run, a higher exchange rate leads to a higher price and that the fiscal policy is very effective to fight inflation. The major factors affecting inflation in Iran, over the long run, are internal rather than external. However, over the short run, the sources of inflation are both external and internal.

Keywords: Demand for money; inflation; fiscal and monetary policies; external and internal factors (search for similar items in EconPapers)
JEL-codes: E31 E41 E62 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2006-03-15, Revised 2006-11
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (21)

Published: Revised version in Journal of Asian Economics, Vol. 17, No. 5 (November 2006), pp. 879–903

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