News ID: 45317
Published: 0739 GMT November 12, 2014

Majlis Research Center proposes approaches to end stagflation

Majlis Research Center proposes approaches to end stagflation

Majlis Research Center's Economic Studies Bureau has proposed 11 approaches to help overcome stagflation.

The center has announced that macroeconomic policies, structural realities and variables of politicized economy should be addressed as three pillars for formulating effective policies.

Accordingly, the following 11 measures should be taken to curb stagflation, the Persian daily Kasb-o-Kar reported.

First, efforts should be made to direct monetary and financial resources to the production sector under the supervision of the government and related unions, provided the move boosts production and quality.

Since some banks inject liquidity into unproductive projects, cash flow should be subjected to closer scrutiny. Financial and monetary facilities allocated for boosting production should also be closely supervised. As a result, expansionary monetary policies for production and contractionary ones for other activities can help combat stagflation.

Second, plans to control the prices of inputs in the production sector and removal of intermediaries supplying raw materials should top the agenda.

Third, if a large number of firms produce the same products without coordination, the final costs will increase and hinder plans for boosting competitiveness among exporters.

Fourth, trade policies should be regulated to support domestic production and eradicate import monopoly.

Fifth, production should be prioritized, while trade and its services should complement production. This can help curb unproductiveness.

Sixth, a downturn in the housing sector hinders national economy. Growing demand in consecutive years and attempts to fish in the housing sectors’ troubled waters encourage construction of residential units. Consequently, banks and other institutes are lured into the lucrative market. Such speculative activities will give rise to recession since the low-income strata are unable to afford high prices.

Facilities granted to builders of residential units based on reasonable profit rates can prevent housing recession. Plans to turn the spotlight on banking loans for housing construction will exacerbate wheeling and dealing, and further spike house prices.

Seventh, efforts are needed to curb inflation that has pervaded the Iranian economy since past few decades. The value of key commodities has often been increased to balance prices. This has adversely affected other sectors and emboldened unproductive sectors to flaunt their clout.

Eighth, plans to support enterprises and monitor their performances will promote production and boost exports, provided they not only improve their quality, but also overhaul the production cycle.

Ninth, security should be boosted for those who launch self-employment schemes in rural and suburban regions. If the police ensure security in such regions, it will help develop farming and livestock breeding.

Tenth, comprehensive plans should be devised to promote the export of industrial and food products as well as techno-engineering services to regional states, particularly Iraq. Besides, participation of domestic firms in tenders should also be encouraged. Political and economic officials should help achieve this objective.

Eleventh, the capital and stock market need amendments to provide the cash flow required by enterprises. This can materialize with the removal of rent-seeking, dissemination of asymmetrical information and careful supervision. This approach can direct savings to projects that can boost economic growth.






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