Abstract: (431 Views)
This paper examines inflation dynamics and evaluates the role of sticky information in the Iranian economy. To this end, two New Keynesian models are estimated and compared within a DSGE-VAR framework. The first model is based on Calvo price setting, while the second incorporates dual stickiness in prices and information. In both models, the real sector, monetary block, investment dynamics, foreign reserves, and oil shocks are specified in a comparable manner so that differences in empirical performance can be mainly attributed to the specification of the Phillips curve. The models are estimated using Bayesian methods and the Metropolis-Hastings algorithm. The results indicate that both models satisfy the determinacy conditions, but Bayesian model comparison strongly favors the dual-stickiness model over the Calvo specification. The log marginal data density of the dual-stickiness model is substantially higher than that of the Calvo model, and the Bayes factor provides decisive evidence in favor of the model with sticky information. The posterior estimates also point to a high degree of price rigidity, strong persistence in price-markup shocks, and an important role for monetary, fiscal, and oil shocks in explaining macroeconomic fluctuations in Iran. The findings suggest that inflation persistence in Iran cannot be explained solely by price rigidity and real marginal cost. Rather, delays in information diffusion and expectation updating are also central to the inflation process. From a policy perspective, disinflation in Iran requires not only controlling liquidity growth and aggregate demand, but also improving policy credibility, managing expectations, and enhancing information transparency.
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