Consequences of Changing the National Currency of Iran in the Iranian Economy

The devaluation of the national currency leads to people's distrust in the national currency and the prevalence of foreign currencies in the country. This puts a lot of psychological and economic pressure on governments. In the event of a devaluation of the national currency, governments should pursue appropriate policies to prevent the weakening of the national currency and endeavor to preserve its value. When the value and status of the national currency is maintained by public confidence rather than gold and silver, governments have a serious responsibility to maintain the value and status of money. Given the continuing trend of inflation in the Iranian economy over the past decades and the sharp devaluation of the national currency, the implementation of the currency reform policy in Iran seems necessary. However, the authorities are still hesitant to implement the plan due to concerns about the inflationary effects of its implementation. For this purpose, in this study, according to the experiences of other countries in implementing the plan to change the national currency unit, its effects on inflation have been studied. At the same time, by estimating the demand function of banknotes and coins, the effect of the change in the demand for banknotes and coins, after changing the currency and printing banknotes with higher face value, on inflation was evaluated. Overall, the results of the studies conducted in this article confirm that the policy of changing the national currency is not inherently inflationary and governments should not be concerned about this.

Keywords:

Currency Change , Inflation , Consolidation , Reliability , Error Correction Pattern