Inflation and its Implications on Iran Economy - Research Paper Example

The paper "Inflation and its Implications on Iran Economy" is a wonderful example of a research paper on macro and microeconomics. The study was conducted with the aim of analyzing the inflation in Iran and finding its implications for the country’s economy. There was also an oversight objective of finding the best counter-strategies that can be used to minimize the effects of inflation on Iran’s economy. There are a number of theoretical and empirical reviews that have been performed to show that inflation may relate to the economy either positively, negatively, or neutrally.

A gap was however found with most of these reviews as each of them picked only one component of the economy and used it in drawing conclusions as to what the impact of inflation on the economy is. To address the gap effectively, the economy was divided into four major components which were GDP, exchange rate, interest rate, and the stock market. All these four components served as the dependent variable while inflation was used as the independent variable. Using empirical evidence with data collected from 1995 to 2014, the relationship between inflation and each of the four variables was determined.

What is more, the economy of Iran was divided into two major periods which were the centrally planned economy and transition economy. This made it possible to understand how inflation affected Iran within each of these two periods. Results from the empirical data analysis showed that indeed inflation reacts to the economy in different ways, depending on the component of the economy under review. For example, whereas inflation fails to have any impact on the exchange rate, it only has a long-term impact on the interest rate.

In terms of GDP and the stock market, however, inflation has been found to have a negative or non-linear impact. Giving more control to the market rather than centrally controlling Iran’s economy has been found to be the best way to counter inflation and its impact on the economy.