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Economists review Hanke’s claim on Iran inflation rate

Tehran, The current annual inflation rate in Iran stands at 151 percent, said Steve Hanke, an economics professor in Johns Hopkins University, in comments that has caused reactions among other fellow economists.

While the Statistical Center of Iran put the inflation rate at 8.7 percent for the 12-month period until July, Hanke believes that the annual inflation rate in Iran is currently at 151 percent.

Meanwhile, the Central Bank of Iran reported the inflation rate to be at 10.2 percent for the same period.

There is a great difference between the inflation rate announced by the Iranian authorities and that of the Johns Hopkins University professor.

Hanke states the facts much better, but it must be noted that the economic performance of a country cannot be assessed and cited based on the inflation index; because the inflation rate is an average of hundreds of heterogeneous goods. Averages never indicate the facts. And what year is the base year is also an important criterion. Mohammad Gholi Yousefi, professor of economics at Iran's Allameh Tabataba'i University, said in a recent interview with the Tehran-based Persia Digest news website.

However, I think Hanke's statistics are more accurate, because most of the goods in Iran are imported from abroad and are therefore influenced by the exchange rate. Exchange rate even affects non-commercial goods such as taxi fares. Therefore, the exchange rate index is more accurate to assess the inflation rate.' He added.

However, Albert Beghzian, an Iranian economis, believes that in order to know if Hanke's statistics are more accurate or the Iranian official statistics, we should wait until the end of the year.

Hanke's approach to calculate the inflation rate in Iran is based on the regression model. It means that, with the statistical model, the relation between the inflation rate and exchange rate changes has been calculated. In fact it uses prediction models based on historical data,' said the professor of economics at the University of Tehran.

But the method of Central Bank and the Statistical Center of Iran to calculate the inflation rate is based on basket of goods, which is not reasonable, considering the increase in price of goods such as vehicles in the market. Therefore, it seems that even if the calculation of the inflation rate by the Iranian authorities is not wrong, it is very optimistic.' He said.

'If the difference between government's exchange rate (4200 tomans) and the market's exchange rate (9000 tomans) remains unchanged, then by the end of the year, we should see an increase of above 50 percent in inflation rate,' He added.

However, Mehdi Pazouki, a professor of economics at Allameh Tabataba'i University, has questioned Steve Hanke's statistics and considers his method to calculate the inflation rate unscientific.

No intelligent economist considers the inflation rate in Iran at 150 percent, as the main needs of Iranian households have not increased in recent months. So, I think this talk is more of a psychological warfare carried out by the enemies of Iran, he said.

Of course, I also believe that the inflation rate in Iran is now a two-digit number, but Hanke's method for calculating the inflation rate is completely wrong, and in no accredited university, the inflation rate is calculated on the basis of changes in the value of the national currency with the international currency, he added.

Source: Islamic Republic News Agency - IRNA


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