The estimation of Iran’s macroeconomics instability index

In this study, we estimate the macroeconomics instability index over the period 1963-2003. Using the definition of Fischer and Bleaney, the study calculates the “macroeconomics instability index”. In order to compute the macroeconomics instability index, four sub-indices of inflation rate, the fractional ratio of budget to the gross national product, the ratio of foreign debt to the gross national product, and the ratio of the free exchange rate to the official exchange rate as the determinant variables of the macroeconomics instability are considered. Then, the study estimates the equations for long-term processes for each variable and determines the deviations from the real values. We also obtain the time series for the macroeconomics instability index, using the calculated simple mean of the variables’ deviations and discuss the results.