Inflation Persistency in Iran with the Heterogeneous Approach of Economic Agents in Dynamic Stochastic General Equilibrium Models

The purpose of this paper is to investigate the inflation persistency regarding the heterogeneous behavior of economic agents. For this, the data were used from 1991-2015 based on seasonal data and Dynamic Stochastic General Equilibrium models. The innovation of this paper is Calvo pricing assumption regarding the lag in inflation rate and indexing parameter in which inflation persistency conditions computing will be more relevant to Iran’s economy. The results showed that inflation expectations have a major role in inflation rate formation so that even if the inflation rate declines it will occur in a longer time due to inflation persistency. It, was cleared the prices have less reaction ability in relation to inflation persistency. It is suggested to the monetary authorities by considering the domestic inflation targeting rule in addition to inflation control, they stabilize the domestic production in the natural level in which it is required the monetary authorities to have credibility in views of economic agents.