Inflation Dynamics in Iran and Its Asymmetric Response to Policy Shocks: A NARDL Approach

Articles in Press

Document Type : Research Paper

Authors

1 Department of Resource and Infrastructure Economics, Center for Development and Research Foresight , Tehran, Iran

2 Department of Economic Development Engineering, Faculty of Management, Economics and Progress Engineering, Iran University of Science and Technology, Tehran, Iran

3 School of Economics and Political Science, Shahid Beheshti University, Tehran, Iran

10.22034/ecoj.2025.68892.3452

Abstract

Objective:

This study aims to examine the responsiveness of inflation in Iran’s economy to key policy variables, including the monetary base, budget deficit, exchange rate, and balance of payments. In addition, the research evaluates the asymmetric responses of inflation to positive and negative shocks in these variables over the short and long run.

Methods:

Time-series data covering the period 2001–2023 were collected and analyzed using the Nonlinear Autoregressive Distributed Lag (NARDL) model to investigate the relationships among the variables.

Results:

The results indicate that the monetary base, budget deficit, exchange rate, and balance of payments play a significant role in explaining fluctuations and variations in inflation. Moreover, the findings reveal that inflation responds asymmetrically to positive and negative shocks in these variables, generating distinct effects in the short and long run.

Conclusions:

The evidence suggests that monetary, fiscal, exchange rate, and trade policies in Iran must be formulated and implemented with careful consideration of their asymmetric and heterogeneous impacts on inflation. Neglecting these nonlinearities may undermine the effectiveness of policies aimed at managing and controlling inflation.

Keywords

Main Subjects

Applied Theories of Economics

Articles in Press, Accepted Manuscript
Available Online from 27 December 2025

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