Abstract

Harmful impacts of high chronic inflation on economy have always required the governors and monetary officials of countries to eliminate the problem and its negative economic consequences. Different methods and monetary systems have been applied to serve the purpose, namely various kinds of exchange rate targeting and monetary variables improvement rate targeting. Studies have shown that in order for achieving success in executing the framework of inflation targeting, there are prerequisites, satisfying which creates the possibility for the framework to be carried out successfully. The main aim of this article is to find the prerequisites for the successful execution of inflation targeting framework, and study the possibility of the execution of the method in Iran. Using the Agenor and Hoffmaister (1997) model and auto regressive distributed lag (ARDL) method, and with annual data of Iran for the years of 1970-2009, two more restrictions on the way of executing inflation targeting framework in Iran are studied.

Key words: Inflation targeting, ARDL, Iran, prerequisite.