Tyranny of numbers

Is Iran’s inflation really slowing?

Posted in Inflation, Macroeconomy, Sanctions by Djavad on January 9, 2019

In my last blog post I suggested that Iran’s inflation may be slowing down, and the latest consumer price data from the Statistical Center of Iran (SCI) suggest that this may indeed be the case.  The Consumer Price Index (CPI) published by SCI rose by 2.6 percent for the month of Azar (November 21 to December 20), an annual rate of increase of 26 percent.  This is high by world standards but low by the standards of this summer, when in August the rate shot up to 127 percent (see Figure 1).  More importantly, it is about the same as the month before, which is why it is safe to say that calmer — not better — times are ahead.  Unfortunately, the reporting of prices has created confusion, some numbers showing inflation slowing while headlines say the opposite.  (more…)

Has Iran’s inflation peaked?

Posted in Macroeconomy, Poverty, Sanctions by Djavad on November 28, 2018

Last June, I wrote on this blog about the return of inflation in Iran, when inflation had jumped from an annual rate of 18 percent in April 2018 to 34 percent in May.  In more recent months, inflation has been running at an annual rate of 78 percent per month, twice the rate in May.  But, for the past two months, October and November, the monthly rate has declined.  Is this a sign that the current phase of high inflation, which started with the collapse of the rial, is about to end?   Containing inflation is critical if Iran is to convince its citizens that economic stability is returning and that the news of hyperinflation and economic collapse are exaggerated. (more…)

Food consumption of the poor in Iran

Posted in Poverty, Sanctions, Subsidy reform by Djavad on August 2, 2018

It is now clear that the purpose of US sanctions against Iran is to make its people miserable enough so they pressure their government to agree to US demands.  One obvious response to this strategy is for the Iranian government to shift resources to groups most likely to feel and transmit these pressures.  If the government has a such a plan, who to protect and how, it seems lost in the chaos of the exchange rate market and reshuffling of government ministers.  Perhaps the past can be a guide:  how did Iran manage the last phase of sanctions, when, in July 2011, President Obama ratcheted them up.

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The cost of sanctions for Iran’s economy

Posted in General, Macroeconomy, Sanctions by Djavad on July 23, 2018

There is no easy way to determine the impact of international sanctions on Iran’s economy, but looking at the growth rate of the GDP after 2011, when international sanctions tightened, is a good place to start.  The question has become more than an historical curiosity since Trump decided to pull the US out of the Iran nuclear deal and reimposed sanctions.   (more…)

The return of inflation

Posted in General, Inflation, Macroeconomy, Sanctions by Djavad on July 1, 2018

According to the Central Bank of Iran, last month (Iranian month of Khordad, which ended on June 20, 2018), consumer prices increased by 4.3 percent.  This translates into a whopping annual inflation rate of 67 percent.  The government announcement was much less alarming, using the so-called point-to-point inflation rate (Khordad 2018 over the same month 2017) of 9.4 percent.  As I explained in a recent interview in Tejarat Farda (in Persian), the point-to-point reporting is very misleading when inflation is accelerating, and does not fool anyone (any more than I could fool a police officer whose radar registered my speed at 80 miles per hour by claiming that my average speed since leaving home has been below the speed limit). (more…)

How large is capital flight from Iran?

Posted in General, Macroeconomy by Djavad on April 19, 2018

On April 10, Iran instituted new foreign exchange regulations involving three changes: devaluation of the official rate by about 15 percent, restricting movement of capital out of Iran, and making the possession of foreign currency in excess of 10,000 euros ($12,500) illegal.  This policy was largely to stop the run on the rial, but rumors of capital flight may have also played a role. In particular, a claim by a prominent member of the parliament that, as reported in Al Monitor, “$30 billion of capital had fled Iran in the final months of the last Iranian year.” (more…)

Was the Living Standard of Iranians Higher Before the Revolution?

Posted in General by Djavad on March 21, 2018

It is not surprising to hear Iranians say that life was better before the revolution.  Depending on their social class, they could be thinking of a variety of metrics, social and economic.  But to hear economists speak about how life for the average Iranian was better before the revolution is surprising, at least to those with access to data.

Two and a half years ago, I addressed this subject in this blog, refuting a claim made by an Iranian economist that in 2013 Iran’s GDP per capita was 42% below its 1976 level. Then a week ago, Masoud Nili, the top economic advisor to President Rouhani, made a similar observation, this time with much wider publicity, saying, according to press reports, that, “income per capita now is 70 percent of its value in 1976.”  So, it’s time to repeat the argument of why this comparison is wrong.

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Does economic growth in Iran increase income inequality?

Posted in General, Inequality by Djavad on January 15, 2018

Inclusive growth is what international organizations recommend these days, and it hard to argue otherwise.  Economic growth is better when rich and poor equally benefit.  Better still, is pro-poor growth, the type that lifts poor people’s incomes more than the rest.  The recent unrest in Iranian cities makes this question timely: was Iran’s recent economic growth following the implementation of the nuclear deal unequal, inclusive, or pro-poor?  Clearly, low-income youth who staged the protests believe that growth has not been inclusive.  Can data verify their sentiments? It turns out they do.  More specifically, the economic growth of 2016, which is the main fruit of Rouhani’s international and domestic policies, does not seem to have reached all social classes equally.    (more…)

Poverty and living standards in Iran after the nuclear deal

Posted in General, Poverty, Subsidy reform by Djavad on January 3, 2018

Many observers in the West have been quick to blame the recent unrest in Iran on high and rising poverty, which is in turn seen as a failure of the Iran nuclear deal (also known as the JCPOA), or the squandering of its windfall.  President Hassan Rouhani sold the nuclear deal to voters, who have elected him twice, as the only way he could improve their lives.  The unrest taking place in Iran’s smaller cities suggests that this promise is far from realized.  As I have written before, there is little doubt that the economy rebounded after JCPOA, but did poverty and the living standards of ordinary Iranians also improve with this economic recovery? (more…)

Rouhani’s new budget aims to eliminate cash transfers

Posted in General, Macroeconomy by Djavad on December 31, 2017

This post is in keeping with my past practice of reviewing proposed government budgets, but this year’s review takes greater urgency in view of the recent protests in Iranian cities that have been linked to the budget for 2018/19 sent to the parliament just three weeks ago.  The basic elements of the budget are the same as in previous years — keeping the size of the government in check and assigning a minimalist role to public investment.  But there are big cut to a popular cash transfer program that has been in existence since 2010.

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