One has to choose between supporting production and inflation
An economist: Our problem is that we have different expectations from the central bank, On the one hand, we say that the central bank should control the exchange rate and inflation, and on the other hand, there is support for production, but these do not come together and it is not possible to pursue several goals at the same time.
According to the International Iranian Stone Exhibition, Kamran Nadri stated: Comparing Iran with other countries in the Corona case is not correct. Iran's economy is facing inflation at the same time as the Corona crisis. There was no inflation problem in other countries, but the Corona crisis caused a deep recession in those countries, and in a way, the rise in prices, which was low in those countries, fell further.
The economist added: "In this situation, the central banks adopt expansionary policies because they are simply facing a recession and there is no inflation." This policy helps to gradually eliminate the recession. In the case of Iran, the story is a bit different because Iran is facing high inflation on average.
"In this situation, it must be decided whether to consider an expansionary policy that can increase inflation, but to some extent help production and prevent a decline in production, or to reach this conclusion," Nadri said. Due to high inflation, production assistance should come from other sources.
He continued: "Other resources mean that the government has facilities and can use these facilities to support production." Since the government does not have these facilities and has been facing a budget deficit since the withdrawal of the United States from the UN Security Council, it has been concluded that aid will be provided to producers, despite the fact that it could have inflationary consequences.
Noting that production is very important in the minds of officials, the economist stressed: "The central bank has come to the aid of production, and in the meantime we may have an increase in the growth rate of liquidity and inflation." Our problem in the economy is that we have different expectations from the central bank and on the one hand we say that the central bank controls the exchange rate and inflation and on the other hand there is the issue of supporting production, but these do not come together and can not be He pursued several goals simultaneously.
According to Nadri, if we want to help production, we face the problem of inflation, and if we want to deal with inflation, we can no longer help production. Here, the country's political system must come to a conclusion about what should be the main priority in the central bank. In other countries, it can be said that due to experience and attention to the achievements of economics, the first priority of the central bank is to curb inflation, because this bank can not help much in production.
He added: "If you want to help production with monetary resources, the cost of this action will show in the inflation sector." Conclusion In other countries, the central bank's priority should be to control inflation, and since they understand that the central bank is under pressure from governments if it wants to pursue this goal, it cannot achieve its goal, so they have said so. The central bank is independent of the government and has set up institutional arrangements so that governments cannot influence decisions made in the central bank.
"If it was clear what we wanted from the central bank and the main purpose of the central bank was clear and the mission of this bank was clear, the central bank could have made more specific decisions to achieve the goal," he said.
Nadri said: "It is also true that the central bank says that due to the special circumstances of Corona, it took measures to support production, but in the future it can say that the government was facing a budget deficit and increased liquidity growth to help the government."
* Tasnim
