Financial Structure and Inflation in Iran

Document Type : Research Paper

Authors

1 Assistant Professor in Economics, Institute for Humanities and Cultural Studies

2 A

3 M.A. Student of Economics, Tarbiat Modares University

Abstract

It is important to answer the question of how countries should design their financial and banking structures to achieve low stable inflation rates. This paper investigates the effects of financial and banking structures on inflation in Iranian economy from 1987 to 2016 using FMOLS method. Our findings reveal that the effect of bank-based financial structure on inflation is negative. From different indices for banking structure, deposit money bank assets can reduce inflation significantly. Moreover, the one-to-one relationship between liquidity and inflation, as monetarists claim, is applied only when the impact of financial structure and banking structure is considered in regression. These findings, generally, are in the support of designing a less unbalanced financial structure and promoting the financial strength of banks in order to lowering the inflation.
 

Keywords

References

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new economy and trad
Volume 16, Issue 2
February 2022
Pages 1-21

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History

  • Receive Date: 08 February 2021
  • Revise Date: 26 February 2021
  • Accept Date: 17 May 2021

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