The budget deficit issue has attracted a great deal of attention over the past two decades, as reflected in substantial in the academic literature and in the policy making community. Moreover, the budget deficit and related issues has become a major problem facing the Iranian economy. The aim of this book has been to achieve two main objectives. First to review some of the main trends in the Iranian economy during 1963-2002 and focus on the evolution of main macroeconomic variables related to fiscal, monetary, and exchange rate policy in Iran with consideration of political factors such as oil shocks, revolution, war and other factors. Second to develop a dynamic macroeconomic model to measure the impact of budget deficit, liquidity (M2), official exchange rate, and political factors on the price level in Iran over the period of investigation. It is now generally accepted that economic agents, private and public alike monitor closely the evolution of prices in the economy, in order to make decisions that allow them to optimize the use of their resources. The analysis of this book will be useful to all of them.
