The Effects of Inflation on Iranian Economic Sectors

Inflation is one of the important economic variables that are considered seriously by economists and policy makers. Different theories have been developed for studying the influence of inflation on production and process of economic growth. This research examines the long-term effects of inflation on various sectors of Iran economy through the structural VAR model using the time series data during the period 1959-2009. The results show that the impact of structural inflation shock on the all economic sectors for a five-year horizon is increasing, but this effect is not uniform (homogenous) across sectors. In long-run, inflation explains over 20 percent of changes of production in service sector. Industry and mining, agriculture, oil and gas sectors were next in the ranking, respectively. These results indicated that Iranian economic sectors’ growth have been affected by inflation in long-run.