Tyranny of numbers

Reading Piketty in Tehran

Posted in Employment, General, Inequality, Macroeconomy by Djavad on July 11, 2014

If you are someone who pays attention to economic news and have not been hiding in a cave for the past few months, you must have heard of the famous book by the French economist Thomas Piketty, Capital in the Twenty-First Century.  Since its translation was published in English earlier this year, it has sold more than half a million copies, which is astonishing for a book with many tables and charts (a publisher once told me that each chart cuts sales by 10%  — there goes that bit of wisdom).

Last month people were also talking about Piletty’s book in Tehran, and this month’s Mehrnameh, published this week, has a section discussing it, including a short interview by yours truly.   I must confess, as I did to the interviewer, that like most people who have bought the book, so far, I have only read the introduction (I have read, however, many of the book reviews — more pages of reviewes than of the book itself! Read an excellent early review by Branko Milanovic here). (more…)

Is Iran’s rate of unemployment really falling?

Posted in Employment, General, Macroeconomy, Unemployment by Djavad on January 29, 2014

I have my doubts about the rate of unemployment — 10.3% — recently published by the Statistical Center of Iran (SCI) for fall 2013 (Iranian year 1392), so in a piece that I just published in Lobelog.com I opted to report a rate of 14% that I estimated myself from the SCI report.  The difference between the published number and mine is, as in my previous post on unemployment, all in counting the reduction in the number of people in the labor force as discouraged workers and therefore unemployed in common parlance. (more…)

Is it time to declare the war on Iran’s inflation over?

Posted in General, Inflation, Macroeconomy by Djavad on January 27, 2014

This is an update on my last post on inflation, which continues to slow down, and a call for letting inflation drop from the top position on the new government’s list of priorities, to be replaced, hopefully, with fighting unemployment. (more…)

Reading inflation in Iran

Posted in General, Macroeconomy by Djavad on November 7, 2013

There seems to be considerable confusion in the Iranian media about the pace of inflation. Since inflation is the main concern of the new Rouhani economic team, getting the facts right about its pace, whether it is rising or falling, is extremely important.  There are questions about the accuracy of the official inflation figures, much of it exaggerated, but the most common source of confusion is not about the accuracy of official data but how to read them. (more…)

Inflation is down but hold the cheer

Posted in General, Macroeconomy by Djavad on September 15, 2013

The latest inflation figures for the Iranian month of Mordad that ended on August 20 show that the Consumer Price Index (CPI) rose by a modest 1.16%, which translates into an annual rate of 14.9%, or less than half of the recent annual rate of inflation.  The month before prices rose at an annual rate of 18.4%, which is also way down from the 49.7% increase Iran experienced in June. (more…)

Inflation reporting in Iran

Posted in General, Macroeconomy by Djavad on April 4, 2013

The statistics most readily available for Iran are about prices, yet they are seen as the least believable.  Last week the Statistical Center of Iran that reports on unemployment, household budget and national income, and  now claims to be the official source for reporting on inflation, published a report providing us with detailed information on prices for the last six years (2007-2013).  It shows that the consumer price index (CPI) rose by 40.6% during the Iranian year 1391 (21 March 2012 to 20 March 2013), and the average index for 1391 was 31.5% above 1390.  The former is the point to point inflation, what people feel, and the other is what is officially reported as the years’ inflation. (more…)

Inflation and money supply in Iran: a closer look

Posted in General, Macroeconomy, Sanctions, Subsidy reform by Djavad on February 11, 2013

Last week, in a post on the Lobelog.com I noted further signs of moderating inflation.  Prices in the Iranian month of Dey (ending 20 January 2013) rose by 1.7%, compared to 2.5% the month before and 4.5% per month in the previous two months after devaluation.  These are high rates of inflation on an annual basis (see chart below), but a sign that the Central Bank may have found a way to keep the growth of money supply below the rate of inflation.  I was curious enough if this were the case to look up money supply data published by the Central Bank and here is what I found.  For the quarter that ended on December 20, 2012, which covers the three month period after devaluation, the rate of growth of money supply was 20 percentage points below the rate of inflation. (more…)

Iran’s Inflation showing signs of moderating

Posted in Inequality, Macroeconomy, Poverty, Sanctions, Subsidy reform by Djavad on January 10, 2013

The Central Bank of Iran has just released the Consumer Price Index for the month of Azar (ending on November 20, 2012), and it shows a much smaller increase in prices than the previous two months.  The index rose by about 4.5% per month during the last two months (equal to 70% annually), but its pace moderated in Azar, rising by 2.5%.  This is still a sizable increase (about 35% annually), but it may be a sign that the large devaluation of the rial during the last week of September has run its course and consumers maybe back in the territory that, unfortunately, they have come to regard as normal: prices rising by about 20% per year.  This is, of course, conditional on no new shocks happening to the exchange rate or the money supply in the near future. (more…)

Prices in Iran and what they mean for the PPP exchange rate

Posted in General, Macroeconomy, Sanctions by Djavad on November 4, 2012

As I have argued in this blog and elsewhere, there is not a single equilibrium exchange rate for the rial. If you believed my rough calculations in my previous post, and if you needed to report only one number, the exchange rate would be something around 20,000 rials per dollar (about 96.5% increase over the old exchange rate of a little over 10,000). The next best thing after an equilibrium exchange rate (ER), one that is actually more useful for welfare comparisons, is the Purchasing Power Parity ER. Here are my back-of-the-envelop calculations of the PPP rate for Iran in 2012.

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Rial devaluation and inflation — without the hype

Posted in General, Macroeconomy, Sanctions by Djavad on October 29, 2012

For the past several weeks, the rapid fall of the rial has been linked to hyperinflation and a possible quick end to the impasse in nuclear negotiations with Iran. Inflation estimates of 196% per year in NYT, 70% per month in Boston Globe, and similar reports in Washington Post and Bloomberg, were all traceable to an article in the Cato website that had prematurely added Iran as the 48th worst case of hyperinflation in the world. Some commentators could hardly hide their joy in the prospect that sanctions were finally, and mercifully, about to spare the Middle East yet another war and the Iranian people years of suffering under sanctions. But these predictions have failed to materialize, and the media interest in the issue has waned. We are slowly hearing the other story of the rial devaluation, its positive effect on local production (see, for example, Jason Rezaian’s informative report in Saturday’s Washington Post).

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