Inflation

Purpose- After the beginning of a new round of sanctions against Iran in 2010-2011, many disorders were introduced in the Iranian economy including increased inflation and reduced purchasing power. It has significantly affected on the welfare of families and, hence. The study objective is to compare the effects of inflation on the costs of the social welfare and income among rural and urban families.Design/methodology/approach - The study adopts a descriptive-analytical methodology and urban and rural families in 31 provinces of Iran constitute its units of analysis. The data was comprised of family expenditure on food and non-food items in urban and rural areas during the period of 2011-2017 (at the height of sanctions) together with inflation. The panel data was analyzed using STATA 15 software package.Finding: The findings showed that inflation has increased income and, as a result, has increased costs and that a one percent increase in inflation has increased non-food costs as much as 0.43 and 0.35 and food costs as much as 0.18 and 0.22 for rural families. Similarly, by a one percent increase in inflation in urban areas of Iran, families’ non-food costs have increased by 0.20 and 0.16 and their food costs have increased by 0.11 and 0.24.Overall, inflation has led to a lower increase in the expenditure of rural families, so that a one percent increase in inflation has increased the costs for urban families as much as 0.32 and for rural families as much as 0.15. Therefore, the inflation caused by sanctions has increased the gap between urban and rural area and, as a result, increased macroeconomic instability. Considering the mutual effect of income distribution, unemployment, inflation and cost on each other, the policy of adjustment of income distribution and tax on income and wealth should be implemented in an exponential manner to reduce inequality. Also, in the face of inequality, in the early stages of development, politicians can control or reduce the upward trend in poverty and inequality by using the tools of transfer payments, social security insurances, unemployment insurances, etc.Originality/value: The results of this research can help organizations in charge of dealing with the effects of inflation in urban and rural areas to have a deeper insight into the existing conditions so that they can reduce the negative effects of inflation on life by using the solutions provided.

The main goal of this research is studying the causative & effect of deficit budget, money offering and inflation rate in Iran during 1360-1390. The results in long time indicates that the bulk of money has had positive effect & meaning on inflation rate during that time and alteration of budget deficit of the government has also positive effect on inflation but by meaningless impress, in other words this alteration has no independent impress from other alterations and specially form the bulk of money on inflation. Also on the basis of the results of Grenjer causative test, there is a direct relationship or indirect among all the alterations in the model. In regard with the results, money offering is one impressive alteration on inflation and continued increasing in offering the money leads to increasing of inflation. In other hand there is a causative relationship between budget deficit and inflation. Increasing the inflation causes increasing the expenditures and decreasing the revenues therefore by considering that high percentage of budget deficit in Iran to be supplied by central bank that has expansible effect on the total demand & price levels. It is necessary that budget deficit to be supplied from other ways except receiving the loan from bank system such as getting loan from people and selling governmental valuable papers.

The Iranian economy is intensely affected by the size of the government and oil income. Oil incomes might influence the relationship between inflation and government size since financing the budget in Iran is based to a significant degree on oil revenues. Due to the significance of government size and oil income on the price level, the oil revenue-government size-inflation nexus in Iran during the period 1991-2021 is considered. Estimation results of a Markov switching model recommend that government size incorporates a significant positive affect on inflation. Moreover, the growth of oil income is found to have a significant negative affect on the inflation. Based on the findings, it appears that there are two regimes being considered: Regime 1, which represents a high inflation regime, and Regime 2, which represents a low inflation regime. Our findings suggest that once in the low inflation regime (Regime 2), there is a moderate chance of remaining in that state. However, if initially in the high inflation regime (Regime 1), there is a higher probability of staying in that state and a lower probability of transitioning to the low inflation regime.

Technological progress has transformed the payment industry. Although alternative payment instruments such as bank cards share some characteristics with banknotes, they are not direct competitors to cash. First, cash possesses unique attributes—its functionality without electrical power and its inherent anonymity. Second, statistical data indicate that the ratio of cash to M1 has stabilized at approximately 10% in recent years, primarily due to its substitution with demand deposits. In this paper, we model the demand for banknotes by incorporating technology-related characteristics alongside conventional theories of money demand. Our approach has important implications for central bank, particularly in liquidity management, currency issuance, effective management of physical currency, and continued investment in digital payment infrastructures. We adopt a macroeconomic perspective that considers banknote demand from both transactional and asset viewpoints. To this end, we estimate an autoregressive distributed lag (ARDL) model, which allows us to analyze both short-term and long-term coefficients within a framework of model uncertainty. A key focus of our study is the estimation of a payment system development index using logistic growth and Gompertz models, through which we assess its impact on cash demand. Our empirical evidence supports the notion of S-shaped growth in the adoption of payment technologies. The findings demonstrate that advancements in the payment sector have led to a significant decline in cash demand. Moreover, while increased real economic activity exerts a positive and significant influence on cash demand, a higher opportunity cost of holding cash has a pronounced negative impact.