A summary of today's editorial in "World of Economics":
Nobel Prize for Economics 2026 and Iran's economy.
Dr. Abbas Malki, Professor of Energy Policy at Sharif University of Technology.
Mohammad Javad Rostami, graduate of economic and financial policy at Cornell University.
The awarding of the 2026 Nobel Prize in Economics to Michael Woodford and Robert Hall provided an opportunity to review the monetary policy issues in Iran. Hall's research focuses on household consumption behavior, consumption smoothing and the effect of expectations on future income, while Woodford emphasizes price stickiness, the relationship between micro and macroeconomics, and the importance of managing expectations and central bank communication. However, applying general equilibrium models to the Iranian economy faces structural challenges, including the "representative household" assumption, which ignores the inequality in the distribution of costs and benefits between wage earners, debtors, and asset owners. Analyzes show that prioritizing price stability, regardless of growth and employment, is not just a technical choice, but related to political economy. On the other hand, monetary policy does not work without a "valid commitment", and in an economy dealing with a budget deficit, the devaluation of the national currency and currency pressures, the announcement of monetary tightening alone does not reduce inflation expectations, because the fiscal behavior of the government and the historical background of instability damaged the confidence of economic activists. The formation of future expectations depends on four factors: trust in decision makers, media coverage, historical experience and information inequality, and families and companies make preventive purchases and raise costs in response to currency fluctuations. Also, monetary and fiscal policy are two branches connected to each other: sustainable control of inflation requires expenditure reform, correction of the budget deficit, subsidies and targeted support for vulnerable groups. The concept of the "natural rate of interest" also faces uncertainties and estimation errors due to structural changes, sanctions and supply shocks, and reliance on it may lead to inappropriate policies. Finally, the independence and transparency of the central bank's communications must be accompanied by democratic accountability, a balance between monetary goals and real variables such as investments and employment, and an understanding of the reality of the country's currency and oil revenues.