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Hyperinflation in Iran

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Hyperinflation in Iran

Inflation is an economic phenomenon that occurs when a country experiences an increase in the domestic money supply in circulation or also a prolonged increase in the price levels of goods and services. This is often concluded after a specific period of time and it is normally associated with causing a general increase in a country’s money supply which subsequently increases the price levels of both domestic goods and services produced by the affected country. Hyperinflation therefore affects a country after experiencing a prolonged period of inflation to the extent of nearly eroding the real value of the country’s local currency. According to Stevenson (341), the effect of a county’s real value of money being eroded is that it makes the country’s citizens to adopt holding foreign currencies that are assumed to be relatively stable and with time the domestic currency completely loses its real value completely. This situation is what is referred to as hyperinflation in economic terms. Inflation has generally affected almost every country at one point or the other. However there are a number of countries who for the past five years have reported very high levels of prolonged inflation. Iran and Argentina are among the countries whose inflation rates have reached the hyperinflation point. This paper analyzes the levels of inflation in Iran looking into the causes and effects of inflation in this country over the past five years.

Iran is among the countries whose economy has recorded hyperinflation. According to Trading Economics (2016), “the current rate of inflation in Iran as at April of 2016 was recorded at 7.40 percent”. However, Iran has recorded high inflation rates over the past years with a recorded average of 14.04 percent from the year 1957 until now. According to the inflation calculation format, Iran is among the countries whose levels of inflation have attained the average hyperinflation points over the past years. Over the years however, this index have drastically fluctuated to as high as 59.02 percent in the year 1995 and as low as -3.37 percent in the year 1958 (“Trading Economics”). This figures portray the effects that the levels of inflation has had on the indicators of inflation. These indicators of inflation affecting the economy of a country include, levels of unemployment, gross domestic product levels, the poverty levels, the money supply levels and the prices of goods and services produced in a country among other indicators. Over the past 5 years, the level of unemployment in Iran has been averagely recorded as 11.63 percent representing close to 21