Currency Depreciation and Income Inequality in Iran, 1984–2024

Iran’s currency has depreciated over a thousand-fold against the US dollar since 1984, while its official Gini coefficient fell from about 0.43 to below 0.40. Using annual data for 1984–2024, I find the exchange rate, broad money and the Gini coefficient are each I(1), but Johansen and Engle-Granger tests detect no robust cointegration. A levels regression yields a high R2 with heavily autocorrelated residuals, indicating spurious regression. Sup-F tests date a permanent downward shift in the Gini at 2011 and in the exchange rate at 2012, but the exchange-rate date is not robust, an alternative series moves it to 1999 and multiple-break analysis finds four exchange-rate breaks (1993, 1999, 2012, 2018) and two Gini breaks (2011, 2017). I therefore treat timing as descriptive. The 2011 shift coincides with the December 2010 subsidy reform, though the design does not identify a reform effect. Granger tests in first differences find no predictive relationship in either direction, unchanged with the alternative series. Gini and exchange rate co-movement is stronger over 2018–2024.

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Journal
Economic Analysis Letters
Published
2026-10-14
DOI
https://doi.org/10.58567/eal06010001
Primary Topic
Monetary Policy and Economic Impact
Type
article
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article

Currency Depreciation and Income Inequality in Iran, 1984–2024

Mohsen Behzadi Soufiani
Economic Analysis Letters
Monetary Policy and Economic Impact
article

Currency Depreciation and Income Inequality in Iran, 1984–2024

Mohsen Behzadi Soufiani
article en

Abstract

Iran’s currency has depreciated over a thousand-fold against the US dollar since 1984, while its official Gini coefficient fell from about 0.43 to below 0.40. Using annual data for 1984–2024, I find the exchange rate, broad money and the Gini coefficient are each I(1), but Johansen and Engle-Granger tests detect no robust cointegration. A levels regression yields a high R2 with heavily autocorrelated residuals, indicating spurious regression. Sup-F tests date a permanent downward shift in the Gini at 2011 and in the exchange rate at 2012, but the exchange-rate date is not robust, an alternative series moves it to 1999 and multiple-break analysis finds four exchange-rate breaks (1993, 1999, 2012, 2018) and two Gini breaks (2011, 2017). I therefore treat timing as descriptive. The 2011 shift coincides with the December 2010 subsidy reform, though the design does not identify a reform effect. Granger tests in first differences find no predictive relationship in either direction, unchanged with the alternative series. Gini and exchange rate co-movement is stronger over 2018–2024.

Economic Analysis LettersVol. 6(1)
University of Tehran (IR)
Reduced inequalities
Openalex Percentile: Top 6%
Monetary Policy and Economic Impact
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