Outcome of Macroeconomic Instability (A Case for Iran)

Abstract

There is no unique threshold between stability and instability for each macroeconomic variable. Rather, there is a continuum of combinations of levels of key macroeconomic variables, including growth, inflation, fiscal deficit, current account deficit, and international reserves, that together can indicate macroeconomic instability. The combination of these factors can make it relatively easy to identify a country in a state of macroeconomic instability or stability. In this paper we investigate the macroeconomic instability and it's outcome in Iran by a self-made index and filtering algorithms (KLR). The result shows that, in the years in which the macroeconomic instability has increased, the economic growth has been affected and decreased. It seems that the macroeconomic instability is a serious barrier against the economic growth of the country.