The Effects of Increases in World Prices on Domestic Price Level, Current Account and Exchange Rate, A CGE Model Approach

Authors

Abstract

The amount of impacts of changes in world prices on economic indices of a country can be studied focusing economy's openness level and volume of the country's interaction with other countries. The increase in world prices in recent years, in one hand and the consistent increase of domestic inflation in the other hand put special importance upon surveying the impacts level of the world prices on domestic economy. Furthermore, the impacts of imported goods price increase on export-import and in other words the trade balance in countries with open economies is undeniable in the economics literature.
In this article, while presenting a general equilibrium model for Iran, the impact of the world price fluctuations of agricultural, industrial and service sector on the level of domestic prices, trade balance and exchange rate has been separately and simultaneously studied. The results show that, agricultural goods price increase, decreases the net exports in goods and services sectors. The increase in industrial goods price has the most powerful effect on domestic price level and the increase in service sector prices. Also, the gross domestic product will be decreased if the global prices are decreased.
JEL Classification: F41,F31,F41,E31,C61

Keywords

Files

Share

How to cite

Statistics