Document Type : Research Paper
Authors
1
PhD in Economics, Faculty of Economics and Administrative Sciences, Ferdowsi University of Mashhad, Iran
2
Master of Industrial Engineering, Islamic Azad University, South Tehran Branch, Iran
3
Assistant professor, department of economics and administrative sciences, Ferdowsi University of Mashhad
4
Faculty of Economics, University of Qom
10.30465/jnet.2024.49115.2146
Abstract
Numerous studies have been conducted to explore the relationship between unemployment, inflation expectations, exchange rates, and inflation. However, the connection among these factors remains ambiguous, especially in the context of Iran's economy, where the macroeconomic structure and geopolitical situation significantly heighten its importance. In this research, the dynamics of the New Keynesian Phillips Curve, considering the exchange rate, are analyzed over the period from Q1 2000 to Q4 2022 on a seasonal frequency using a Multivariate Continuous Wavelet Transform (MCWT) model across different frequencies (short-term, medium-term, and long-term). According to the findings of this study, the structure of the Phillips Curve does not align with the realities of Iran's economy. Even during periods of economic recession and expansion, a significant relationship between inflation and unemployment is sometimes absent, even in the short term. However, inflation is primarily influenced by inflation expectations and, to a lesser extent, by the exchange rate in the medium and long term. This indicates that if expectations and exchange rates are not managed, they could lead to persistent long-term inflation. Furthermore, due to price stickiness, even with successful management of exchange rates and expectations, a significant reduction in prices may remain elusive.
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