The Effect of National Currency undervaluation on the Impact of Inflation on Iran’s Economic Growth: An Application of Artificial Neural Networks

Document Type : Scientific paper

Authors

1 Department of Economics, Ur. C., Islamic Azad University, Urmia, Iran

2 Department of Economic, Ur. C., Islamic Azad University, Urmia, Iran

3 Department of Mathematics, Ur. C., Islamic Azad University, Urmia, Iran

10.22080/mrl.2025.29585.2188

Abstract

In recent decades, extreme currency fluctuations have become one of the characteristics of Iran’s economy. In this regard, in addition to the economic factors that justify exchange rate changes (particularly fluctuations in the value of the USD) the government’s policy of undervaluation the national currency has attracted significant attention due to the extent of its predictable effects on the national economy. This policy is particularly emphasized by economic analysts who support development strategies. However, other analysts focus more on the inflationary consequences of implementing such policies. So as to scrutinize the economic effects of implementing this policy, the present study examines impact of national currency undervaluation on the effect of inflation on economic growth in Iran from 1980 to 2023. According to the results, although the direct control of exchange rates cannot be defended, the positive and expansionary effects of inflation on economic growth due to the national currency undervaluation in the free market are demonstrated. Nonetheless, in a country like Iran, where controlling inflation must be a top priority for economic goals and policies, the policy of depreciating the national currency cannot easily be supported. In fact, the successful implementation of advanced economic policies requires a deep examination of the country's infrastructure, influential macroeconomic variables, and level of development. The present study focuses on the level of financial development and physical capital indices as infrastructures and effective variables influencing economic growth. 

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Macroeconomics Research Letter
Volume 20, Issue 48
December 2025

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History

  • Receive Date: 01 July 2025
  • Revise Date: 10 October 2025
  • Accept Date: 11 November 2025

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