Saturday, April 20, 2013

Second International Conference on Iran’s Economy

International Iranian Economic Association (IIEA)
Second International Conference on Iran’s Economy
Bilgi University, Istanbul
24-25 June 2013 
  1. The International Iranian Economic Association (IIEA)
IIEA is a pioneering initiative to foster high level academic research and scholarship on Iran’s economy. This project is initiated by twenty five senior economists from various institutions the around the globe who act as its ‘Founding Members’. The inaugural conference of the IIEA was held in SOAS, University of London in December 2011.
  1. The Conference
IIEA’s second conference is scheduled for 24-25 June 2013 and is to be hosted by Bilgi University in Istanbul. We have already received a keen response to the call for papers that went out in late 2012. The Programme committee is now in the process of screening and selecting the final papers.
Program Committee Co-Chairs:
  • Yeganeh H. Farzin (University of California, Davis)
  • Hassan Hakimian (SOAS, University of London)
Scientific Committee:
  • Parvin Alizadeh (London Metropolitan University)
  • Mohsen Bahmani-Oskooee (University of Wisconsin-Milwaukee)
  • Mahdi Barakchian (Sharif University, Iran)
  • Sohrab Behdad (Denison University)
  • Firouz Gahvari (University of Illinois at Urbana-Champaign)
  • Hamed Goddusi (M.I.T.)
  • Nasser Khiabani (Institute for Management and Planning Studies, Iran)
  • Esfandiar Maassoumi (Emory University)
  • Hamid Mohtadi (University of Wisconsin-Milwaukee)
  • Farhad Nomani (American University of Paris)
  • Djavad Salehi-Isfahani (Virginia Tech)
  • Davood Soori (Institute of Banking Sciences, Iran)
  • Homa Zarghamee (Columbia University)
Organizing Committee Co-Chairs:
  • Hadi Salehi Esfahani (University of Illinois at Urbana-Champaign)
  • Esra Gürakar (Okan University)
  • Ege Yazgan (Bilgi University)
  • Standard rate £200; 
  • Academic rate £70; 
  • Students: £20
Contact email: Valentina Zanardi:
Contact Tel: +44-20 7898 4490
Santral Campus of Bilgi University
Santral, Istanbul
Eski Silahtarağa Elektrik Santralı
Kazım Karabekir Cad. No: 2/13
34060 Eyüp İstanbul

Wednesday, April 17, 2013

Still resilient: people vs. prices

My recent article for

As Iranians came back from a long new year holidays they face more volatility in their economy than they expected. Two digits inflation rate has been part of Iran’s economic reality for the past decades, however recently Statistical Center of Iran (SCI) announced that inflation has reached new heights in the last month of last Iranian year (March 2013).

According to the SCI latest report released on April 1st 2013 Consumer Price Index (CPI) has reached 601.4 using 2002-2003 as a base year. This signals an increase of 40.6 percent compared to the same month in the previous year when CPI was 427.6.  Compared with the prior month the CPI has increased by only 3 percent rising from 583.7 to 601.4. The lion share of increase in CPI belongs to increase in the price index for food products; 85.1% of the change is due to the increase in the prices of these items. Overall CPI increased by 31.5% during last Iranian calendar year (March 2012-March 2013), however this ignores the point to point increase of 40.6% and downplays the drastic increase in the price levels.

Citing these differences some argue that the data does not reflect the true inflation rate in Iran. However that argument is valid about many countries. For example Canadian government adjusts CPI estimations from time to time to keep the official value within the targeted area of 3%. Recently USA government has decided to use a different approach to using CPI in estimating the adjustments in the social security payments. The important point about CPI is not how much it is but how one can interpret its changes.

Interpreting variations of CPI many economists will remind you that an increase in CPI reflects a potential decline of shopping power for the average typical household. After all CPI is estimated using an average typical household’s consumption basket. This basket includes the average amounts of items consumed by average families. This is the practical approach to estimating CPI, however by using a fixed weight for different items and using a limited number of items CPI does not necessarily reflect all the changes. Thus it is not a good way to measure what people are actually buying at the store. It does not take into account the simple fact that shoppers might alter the amount of their purchases when the prices are rising. A household’s budget dictates the total cost it can spend, not the amount of items. When prices change a household cope by changing the amount of items they purchase. Here one must look at the numbers more closely.

Inflation: increasing at an increasing rate

The price index to for overall category of food, drink and tobacco products reached 895.6 in the last month with the price index for food items reaching 937. This is an overall increase of 57.4% compared to the same month last year, when one estimates point to point inflation in food products. In other words average typical Iranian family had to spend 57.4% more on average on food items in this Nowruz compared to the previous one. It is only logical to think that many Iranian households had to make adjustments in their consumption baskets by choosing to buy less from some products, food items in this case. Since the total consumption is not known for different items it is difficult to identify where average Iranian households had to compromise. The true welfare effects of this increase in inflation are unknown.

Traditionally SCI and Central Bank of Iran (CBI) report the average change in price indexes and not the point to point changes, which is usually higher than 12 month average.  One also needs to take into account that Iranians experience the sharpest increase in inflation during the Iranian New Year shopping season. Reporting a 12 month average would reduce the seasonality affect. However the fact remains that the inflation has increased across all the months for the last Iranian year. It is noticeable that it increased at an increasing rate during fall of 2012 and winter of 2013.  Some might argue that this pattern is not alarming and it follows the traditional business cycle in Iranian economy. However reviewing SCI report one notices that 12 month average increases in inflation for March 2012 through March 2013 are uniformly higher than the same averages for the period of March 2011 through March 2012.

Facing these changes the question remains that how an average Iranian household will react to increasing prices. One interesting observation is the number of domestic travelers during the Iranian New Year holidays. According to one estimate the number of domestic travelers passed 61 million. That is a significant number in a country of 77 million. Again this aggregate number hides the substitution effects, which might exist. It is true that some Iranians might have chosen domestic travels because traveling abroad has become too expensive following last year devaluation of Rial, Iranian domestic currency. However looking at the number of travelers one can conclude that the average Iranian family can still afford traveling and a three weeks holiday, a not insignificant fact to remember.

Reading SCI report on price indexes one has no doubt that the prices have been rising at a faster pace than before in Iran. Many observers will follow the inflation in Iran closely in coming months. However when placed in the overall context of the economy and when other economic factors are taken into account one has to admit the average typical Iranian household has remained resilient in the face of economic volatility.

Tuesday, April 09, 2013

Bushehr Earthquake

Mehrnews reports that an earthquake of 6.1 magnitude hit Kaki county in the province of Bushehr at 4:22 PM on Tuesday April 9th. The center of quake is 160 km from Bushehr nuclear facility. So far casualties stand at 32 killed and more than 500 wounded. A large number of wounded needed first aid and were released after being treated.

Sunday, April 07, 2013


The 5+1 reminds me of Iran's negotiations with Iraq before Iraq attacking Kuwait. They met, they talked but nothing came out. Then Iraq attacked Kuwait and out of sudden "There was a will" on Iraqi side. They released our POWs over night almost. I remember that night I was camping with my high school in Golestan Forest in Gorgan. Our bus driver came to tell us and our teachers that "The dude said to come and to take your boys home". We were so happy three of us had fathers who were POWs then.
I do not know what is needed for a will to exist this time though.

Saturday, April 06, 2013

Holding Your Breath

As Iranians come back to start a new working year, they are uncertain about their immediate economic future. 
Iran amazes me. Today the Iranian New Year holidays were over, officially and unofficially. By the official account this year the holiday season lasted 23 days! While the official holidays is usually 5 days, the 29th of of Esfand is the anniversary of nationalizing oil and still an official holiday. In a leap year, which 1391 was, Esfand has 30 days, so the 30th of Esfand is a holiday anyway. So far you have 7 days. Then schools and universities are closed until 13th of Farvardin which fell on Tuesday this year. Parents are off because kids are off and then Friday is the weekend so only few worked on last Wednesday and Thursday. Even Donya ye Eghtesad, the progressive daily dedicated to market economy and covering business news resumed its circulation today. So literally the economy was on the hybrid mode for more than 3 weeks! Even on Facebook the discussion was mostly about Kolah e Ghermezi 92, a national TV show loved by all age groups. 

And today, well today since offices are open people are going around wishing happy new year for their bosses, colleagues, supervisors and etc! They exchange news and the updates. Those who went to see Mohammad Khatami all were asking if he would run in the upcoming presidential election. In other gatherings in business offices and stores many were wondering what would come out of this round of 5+1 negotiations.  Many are praying for an to the sanctions. Many do not know how the economy will take another year of sanctions. 

Last year inflation rate reached 31% according to Central Bank of Iran. Rial lost its value and now has three exchange rates in Iran. At least one official admitted that Iran lost 50% of its foreign revenues. This caused a shortage of medical supplies, a major import item in Iran, but did not stop unknown businessmen from importing more Porsche cars. In the same time some businessmen are still braving the international markets to exports Iranian goods and services. Iran and Egypt have started their collaboration in tourism. The economic activities continue, while the economic growth is hampered.  

For now everyone seems to be waiting to see what would happen. May be in the face of this uncertainty one could forgive a nation celebrating spring for three weeks, after all who knows what tomorrow will bring.