Iran Economics Analysis
Introduction and Data Presentation
Iran's economy is one of the richest countries in Asia - the 18th in the world by volume of national production (according to the CIA, 2010) and the largest among the countries of Western Asia, the Middle East and OPEC. Iran in terms of GDP is the largest economy in the Islamic world after Turkey. The volume of GDP in 2011, $ 928.9 billion, GDP growth - 2.5%.
At competitive occupies 23 place on innovation - 27, the index of the knowledge economy - 34th place among the other nations of the world. Iran possesses the third volume, after Saudi Arabia and Venezuela's oil reserves (18.8 billion tons, 9.9% of world reserves) and covers 5.5% of the world market of oil products trade. Since 2008, Iran sells its oil to a private exchange in Euros and rials.
Iran has a positive trade balance of 73% (exports - $ 131.8 billion, import - $ 76.1 billion). Last time, special attention is paid to the diversification of the Iranian economy through the development of industries such as precision engineering, nuclear industry, automotive engineering, aerospace industry, as well as nanotechnology, medicine and information technology.
Recent years, according to the TV channel "Al Arabiya", the Islamic Republic is in its deepest crisis since its formation. Tehran will not be able to cope with the challenges the country faces economic problems. The reason for this became the failed economic policies of President Ahmadinejad and the economic sanctions imposed on Iran by the international community
The data is obtained by year from 2000 to 2010. There are five measurements of data: money supply, consumer price index, exchange rate, real GDP and nominal interest rate.
- Money supply
Money supply is a collection of cash in circulation and bank deposits balances in accounts that have physical and legal entities and the state. Indicators of the structure of the money supply are the monetary aggregates. Monetary aggregates are called kinds of money and cash, differing degrees of liquidity (the ability to be rapidly converted into cash).
In different countries highlighted the monetary aggregates of different composition. IMF calculates the total for all countries outside the M1 and a broader measure of "quasi-money" (time and savings bank accounts and the most liquid financial instruments traded in the market).
For Iran, the data of money supply (M1) is given below:
- Consumer Price Index (CPI)
Consumer price index reflects changes in prices of goods and services during the reporting period (month, 3 month, year). Reflects the change in the cost of living in the country, as an early indicator of consumer inflation by fixing the purchasing power of the currency. The growth of the consumer price index reflects the fact that a typical basket of goods and services increased in value relative to the base period. Accelerating growth CPI says about strengthening the growth rate of consumer inflation, which in terms of economic growth often is a signal to a tightening of monetary policy.
The consumer price index is usually published monthly and has a significant impact on exchange rates, as can more accurately determine the direction of monetary policy, as well as the state of consumer demand.
The Iranian data is given below:
- Exchange rate
The exchange rate is the amount of one currency that must be paid for the purchase of foreign currency, i.e. for the exchange of currencies.
The exchange rate is often called the exchange rate.
There are two types of exchange rates:
- The current rate, i.e., rate at a given time.
- Forward exchange rate. This rate is calculated for the current day, but the calculations in the future.
Since currency trading is always paired, the exchange rate is always affects the cost of exchange in the pair in relation to each other. If the price of the base currency (the one you want to buy) increases, the value quoted currency (which you pay for the base) decreases relative to the first.
Iranian data is below:
- Real GDP
Real GDP is GDP measured in constant (constant) prices in the base year prices. In this case, the base year can be selected for any year, chronologically as before and after the current. The latter is used for historical comparisons (e.g., for the calculation of real GDP of 1980 in 1999 prices. In this case, the 1999 will be the base, and 1980 - current).
Real GDP = Nominal GDP / average level of prices
- Nominal interest rate
The interest rate is the amount shown as a percentage of the loan amount paid by the borrower for the use of them in terms of a certain period (month, quarter, year). From the standpoint of the theory of money, the interest rate is the price of money as a store of value.
Now perform the equilibrium analysis on for money market. We have to determine M, P, Y, R:
- M is money supply.
- P is price level.
- Y is income or output.
- R is interest rate.
Calculate M/P and express the data in the following table:
Hence, according to this output we have to say that the obtained regression equation is:
MP=-216948+6801.908*Y+11330966*R
Or
A=-216948B=6801.908C=11330966
According to the ANOVA output we can say that the model is actually not significant at usual level of significance 5%. This is because we have only 11 observations in our data set.
According to the regression summary the p-values of the coefficients are extremely high, this is another evidence that the model is bad and can’t be used to make any forecasts.
However, this is a tutorial assignment and here we just show our skills of statistical and economics analysis.
Works Cited
World Bank forecasts 1.5% GDP growth rate for Iran in 2014. Tehran Times, June 11, 2014. Retrieved June 12, 2014.
Ladane Nasseri and Dana El Baltaji: Iran’s Economy to Shrink on Tighter Sanctions, World Bank Says. Bloomberg Businessweek, June 12, 2012. Retrieved July 24, 2012.
Iran Investment Monthly. Turquoise Partners (April 2012). Retrieved July 24, 2012.
Iran and the MDGs. United Nations Development Program (2003). Retrieved November 29, 2010.
Central bank: Income equality improved in Iran. Tehran Times, May 1, 2012. Retrieved May 2, 2012.
