Inflation or Unemployment

Stagflation is associated with an economic calamity in which high inflation, recession, and unemployment sting the inflicted society. This is exactly the dominant condition in today's Iran. Causes and factors contributing to stagflation require in depth scrutiny and identification. It is a prevailing habit that most people, particularly the politicians, look for somebody to blame. Whether fair or unfair, the target victim is usually the former administration. However, that is not the issue to be discussed here. What signifies itself for both the society and policy-makers is introducing solutions to current problems. These solutions are expected to relieve the pains thrusted upon society with maximum effect and least costs. That is why the very issue of prioritization comes to fore. It is vital to rank economic indexes first and, accordingly, deploy the forces against the ghostly inheritance of stagflation. Availability of credit and quantitative easing is often considered as a proper way to combat stagnation. However, it may sound unreasonable if and when liquidity takes the first responsibility in creation and surge of inflation. This is a matter of debate among policy-makers and economists in current days of Iran. Some experts prefer to combat stagnation and encourage production, economic activities, and hence employment whereas others argue that such measures would prove null and void unless inflation is curbed. This dilemma extends to fiscal, monetary and exchange rate policies as to how they can target either stagnation or inflation. Current performance of the government implies that inflation has been prioritized over unemployment. It is anticipated that anti-inflation policies would create a short-term extension of unemployment and stagnation in society since non-inflationary measures are gaining momentum. The first policy to be discussed is monetary policy together with the role of the Central Bank in its implementation. Independence of the central bank, degree of its intervention in foreign exchange rates, and separation of fiscal and monetary policies are among other issues to be resolved. Given curbing inflation as the first priority in Iran's economy, the central bank is expected to take contractionary measures and avoid accumulation of liquidity. Besides, fiscal discipline should find its way to the government agenda since most of its money originates from the central bank. This powerful money multiplies liquidity and intensifies inflation. In addition, dynamic and constructive interactions with the world, absorption of direct foreign investment, transfer of technology, enhancement of productivity, increase of exports, and penetration into international market networks lie among other priorities to encounter basic economic challenges. Reformation or reconstruction of the banking system may also help direct the existing resources towards areas which create instant added value and act as locomotives of economy. With the contribution of the Central Bank of the Islamic republic of Iran and Monetary and Banking Research Institute, the 24th Annual Conference on Monetary and Exchange Rate Policy with the theme of Restructuring Monetary Policy and Policies to Exit Stagflation is scheduled to be held in Tehran Summit Convention Center from 15-16 June 2014. The program features the main topics regarding the issue and one of its most important goals is to promote interactions, talks and discussions in order to offer a real opportunity to economic researchers and policymakers to examine the strategies to get out of stagflation. This conference can serve as an effective instrument to review and redefine the performance of the banking system, empowerment of banks and credit institutions, development of capital market, diversification of finance instruments, as well as orientation of resources towards production.