چکیده:
This paper pursues two goals. First, it uses an unrestricted error correction model and the bounds testing approach proposed by Pesaran, Shin, and Smith (2001) to study the short- and long-run effects of bank credit on inflation in Iran, a country with some history of interest-free banking system. Second, this paper examines how institutional and cultural changes resulted from bank nationalization and the implementations of interest-free banking have affected price level movement in Iran. The approach used in this paper is capable of testing the existence of long run relations regardless of whether the underlying variables are stationary, integrated, or mutually cointegrated. The result indicates that there exists a long-run relationship between inflation and its main determinants, namely, bank credit, import price, real GNP, and black market exchange rate. However, bank credit has no short-run effect on price level movement in Iran. Furthermore, the paper shows that the nationalization of banks and the implementation of interest-free banking system in Iran have caused a structural change in the behavior of inflation.
خلاصه ماشینی:
"To answer this question we develop an unrestricted error correction model (UECM), and use the bounds testing approach proposed by Pesaran, Shin, and Smith (2001) to study price level movement in Iran for the period 1959-2002.
His estimation results show that inflation in Iran is affected by money supply, real output, import price, and black market exchange rate.
(2001) to investigate the level relationship among variables with different degree of integrations and the application of Unrestricted Error Correction Model (UECM) to inflation determination in Iran are unique to this paper.
2- Model Specification and Method Using Tang (2001) and Ramakrishnan and Vamvakidis (2002) and following the literature on price level movement in Iran, the rate of inflation is assumed to depend on expected inflation, bank credit, output level, black market exchange rate, and import price.
Black market exchange rate is introduced into our model because parallel market for foreign exchange has had a strong presence in the Iranian - Cheng and Papi (1997) also use output, money stock, import prices, exchange rate and wage rate as independent variables to study inflation movement in Turkey.
Second, this paper examines whether institutional and cultural changes resulted from bank nationalization and Islamization have caused structural breaks on price level movement in Iran The result confirms the existence of a long-run relationship between inflation and its main determinants, namely, bank credit, black market exchange rate, real GNP, and import price."