Does Oil Price Pass-Through into Inflation in Iran?

Review of economic developments in Iran over the past four decades has shown that oil revenues, has had deep and wide impact on economic indicators. The Two channels which oil price changes directly or indirectly affect inflation _as the most important Economic variables_ are: increase in demand (Mainly by government public budget and Influencing the components of monetary base and money supply) and increase in production costs (via the price of factors of production). In this regard, the present paper attempts to investigate the nature and causes of oil price pass-through into inflation in the short-and-long term; analysis of the pass-through and in addition design the necessary policies to control its destructive consequences. For this purpose, the dynamic error correction model was used and the data were collected monthly from 1380/1 to 1390/1. The findings showed that the oil price pass-through into inflation in both short-and-long term were Positive and incomplete. Therefore, it would be useful in policymaking.