An analysis of the effective factors in creating high inflation in Iran: A quantile regression approach

Inflation has become one of Iran's permanent problems, and unlike many countries in the world, Iran has not been able to keep inflation at low levels. In this research, the factors affecting inflation between 2001 and 2021 were investigated using the quantitative regression approach to compare the intensity of the effects of variables at different levels of inflation. The results show that M2 growth has a positive and significant effect on inflation in all distributional quantiles, but this effect is ascending from the first to the second decile and then goes through a downward trend. The exchange rate coefficient, which was 0.120% in the first decade, reached 0.204% in the last decade and this shows that at low inflation levels, the exchange rate has less impact on inflation, but at higher levels of inflation, the intensity of the effect of the exchange rate on inflation also increases. In Iran's economy, the deficits that have led to the creation of liquidity beyond production have become a factor for excess demand and the formation of pressure to increase prices. In addition to the M2 growth, currency jumps have also played a significant role in Iran's inflation, and in the absence of currency jumps, the inflation rate experienced milder changes.